Review Of Literature On Financial Statement Analysis

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Meigs and Meigs (2003) stated that the rate of return on investment (ROI) is a test of management’s efficiency in using available resources. White ratios and other relationships based on past performance may be helpful in predicting the future earnings performance and financial health of a company, we must be aware of the inherent limitations of such data.

Initially gross profit is calculated by subtracting cost of goods sold from net sales.

Cost of goods sold is the expense occurred from the sales of the goods, Labour cost, raw materials and overhead expenses occurred during the sales period falls under the cost of goods sold category.

b) EMPLOYERS: Also need these reports in making collective bargaining agreements (CBA) with the management, in the case of labour unions or for individuals in discussing their compensation promotion and rankings.

c) PROSPECTIVE INVESTORS: They make use of financial statements to assess the viability of investing in a business.


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