# Analysis of Financial Statements Notes | SwaVid Analysis of Financial Statements, NCERT Class 12 Accountancy: notes with key ideas, formats, common mistakes and 3 quick checks with worked answers. Canonical: https://www.swavid.com/cbse/class-12/accountancy/chapter/analysis-of-financial-statements Source: https://www.swavid.com/cbse/class-12/accountancy/chapter/analysis-of-financial-statements # Analysis of Financial Statements ## Definitions, formats and formulas ## Key ideas ## Common mistakes ## Quick checks ## Keep going ## Questions parents ask ## Class 12 Accountancy on SwaVid ### Meaning and significance of analysis ### Users of financial analysis ### Comparative statements ### Common-size statements ### Limitations of financial analysis ### Next chapter ### Related chapter ### Related chapter ### All chapters SwaVid › CBSE › Class 12 › Accountancy › Analysis of Financial Statements Notes written by SwaVid from the NCERT textbook. Class 12 Accountancy, NCERT Accountancy Part II: companies, analysis and cash flow. Key ideas, definitions and common mistakes. CBSE does not print marks for a single chapter. Short answer. This chapter explains the meaning, objectives, tools, and limitations of financial statement analysis. Students learn how to evaluate profitability, solvency, and operational efficiency using comparative statements and common-size statements. Source: NCERT Accountancy Part II: companies, analysis and cash flow (Reprint 2026-27) , Analysis of Financial Statements Financial statement analysis is a systematic process of critically examining the accounting information given in financial statements. It helps users assess the financial health, operating efficiency, profitability, and growth prospects of an enterprise. Both internal and external parties use this analysis. Management uses it for decision-making and planning, while trade creditors, lenders, investors, employees, and tax authorities use it to judge safety, returns, and compliance. Comparative statements present figures for two or more periods side by side along with absolute changes and percentage changes. They enable horizontal analysis to show trends over time. Common-size statements convert each individual figure into a percentage of a common base. In a common-size balance sheet, total assets or total equity and liabilities is taken as 100, while in a common-size statement of profit and loss, revenue from operations is taken as 100. The analysis suffers from the inherent limitations of financial statements, such as historical cost basis and ignoring price level changes. It also overlooks qualitative elements like employee skill and cannot identify window dressing directly. Try each question first. Then tap it to see the answer. Absolute Change = ₹ 7,50,000 - ₹ 5,00,000 = ₹ 2,50,000 Percentage Change = (₹ 2,50,000 / ₹ 5,00,000) × 100 = 50% Absolute change: ₹ 2,50,000; Percentage change: 50% Base amount (Revenue from Operations) = ₹ 8,00,000 Percentage = (₹ 4,80,000 / ₹ 8,00,000) × 100 = 60% 60% Non-current assets percentage = (₹ 12,00,000 / ₹ 20,00,000) × 100 = 60% Current assets percentage = (₹ 8,00,000 / ₹ 20,00,000) × 100 = 40% Non-current assets: 60%; Current assets: 40% Accounting Ratios . Financial Statements of a Company . Cash Flow Statement . The 10 chapters of Class 12 Accountancy . CBSE does not give marks to one chapter. It prints marks for units or parts, and the chapter list page shows them all. No. They are written by SwaVid from the NCERT textbook. The CBSE curriculum is the reference for what is assessed. Accounting Ratios. SwaVid is an AI tutor for Indian students in Classes 6 to 12. It finds the earlier ideas a child missed, then teaches today’s chapter. Start free to see how it works. - NCERT NCERT book, Class 12 - 80 marks, theory paper - 3 quick checks - Dividing the absolute change by the current year figure instead of the previous year figure . Always use the previous year amount as the denominator when calculating percentage change: (Absolute Change / Previous Year Amount) × 100. - Taking total revenue instead of revenue from operations as the base in a common-size statement of profit and loss . Set net revenue from operations (sales) as the 100% denominator. Treat other income as a separate item expressed as a percentage of revenue from operations. - Adding percentage changes directly in comparative statements . Compute the percentage change for totals and subtotals separately from their absolute figures. 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