Financial statement analysis and standards

Financial statements tell a story in numbers, but the story is in the ratios, not the raw figures. Ratio analysis compares profit with sales, assets with liabilities and returns with investment, so that a firm's performance and position can be judged and compared. Worked example: a firm with current assets of ₹5,00,000 and current liabilities of ₹2,50,000 has a current ratio of 2:1 — it holds twice as many short-term resources as short-term claims, a standard benchmark for short-term solvency.