Analysis of Financial Ratios
There are two major methods to analyze the financial statements (through the use of financial ratios). In the implementation of the first method, the "cross- sectional analysis” the company's financial condition at a specific time is evaluated and compared with the performance of its competitor. In the implementation of a part this process, the system is used known as the
"DuPont system". Using this system, the interrelationships between activities related to financing and firm performance is compared. In the second method, the “time series analysis", the company performance is compared in consecutive years. These two methods are complementary and should both be considered as part of the analysis of financial statements.