Financial ratios are calculated mainly from a company's financial statements such as balance sheet and income statement. Financial ratios can give a financial analyst an excellent picture of a company's financial position and how the sales trends, profits trends, expenses trends are behaving and developing. A break-even analysis is a very effective tool in analyzing an entity since it shows you when you will start generating profits. Financial analysis can help managers analyzing, interpreting and evaluating the company's financial statements especially income statement and balance sheet by converting the financial data into useful, meaningful financial information.

Financial analysis groups and categorizes the ratios into different groups based on company's financials and operations. The main ratios groups are described below.

• Leverage Ratios which can describe the extent that debt is used in a company's capital structure. To what extent the company's
  owners depends on borrowings? Leverage ratios include debt ratio, interest coverage ratio, debt to equity ratio and others.
  
  
• Liquidity Ratios which describe company's short term financial structure or solvency. Liquidity ratios mainly compare current assets with
  current liabilities to ensure efficient financial structure. Liquidity ratios include quick ratio, current ratio and others.
  
  
• Operational Ratios which use turnover measures to show how efficient a company is in utilizing is own assets. Operational ratios
  include accounts receivables turnover, inventory turnover and accounts payable turnover.
  
  
• Profitability Ratios which depends on margin analysis and show the return on sales and capital invested. It includes gross profit ratio,
  net profit ratio, return on investment, return on equity and others.
  
  
• Solvency Ratios which measure company's ability to generate cash flow and pay it financial obligations. To what extent the company
  can utilize its current assets to pay and settle its current debts and obligations.
  

Recently, most countries adopted the International Financial Reporting Standards IFRS to prepare companies financial statements. Doing this will help unifying companies financial statements worldwide. There are four major financial statements requested to be disclosed by most countries regulations:

Companies that adopting the financial forecast can get many advantages such as: the company understand how its business works at a very basic level, forecasting is considered essential for corporate performance management, firms that forecast revenues, expenses and expenditures can react and behave more accurately and faster to meet business changes and are well prepared to take the advantages of the available opportunities in the market. Financial forecast can be conducted through the following techniques;

Quantitative techniques: quantitative techniques of forecasting are best used when changes are infrequent. Nowadays business conditions are changing rapidly so, quantitative techniques seems to be not appropriate. Examples of quantitative techniques are as follows; trend analysis, regression analysis (statistical approach) and percent of sales method.

Qualitative techniques: qualitative techniques of forecasting are best used when are working in a rapid business and changing improvements. Examples of qualitative techniques are as follows; surveys, interviews, market reports and articles.

Financial planning provides many advantages to decision makers. It enables them decide based on reliable, accurate, precise and dependable financial data. Financial planning helps investors and decision makers to effectively utilize company's resources to achieve maximum benefits. Also financial planning enables mangers to conduct SWOT analysis by determining strengths, weaknesses, opportunities and threats. When managers develop an efficient planning tool it can be utilized as controlling tool by comparing actual results with planned results. Capital budgeting is considered one of the most effective tool in conducting financial planning, it provides information about all related expenditures that are expected to be consumed by the project in addition, it also provides information about all related revenues that are expected to generated by the project. The main evaluation techniques for certain projects are including payback period, discounted payback period, internal rate of return (IRR), net present value (NPV), index of present value, future value and others.

Personal financial statements help you tracking income and expenses, obligations and dues and determining the overall net worth. By conducting personal financial planning, you can plan for child's education, buying a car, wedding, vacations, managing portfolios, buying a house and retirement planning. Banks, financial institutions and most equity investors, looking for information not only about your business's financial position, but also about the personal financial position of the business's owners. When you are looking for financing for your business developments and investments, most banks and lenders will ask you to provide specific financial statements to evaluate your application. It is a good idea to provide your lender with as much information as possible when applying for a loan. Personal financial statements outline all the required information about your personal position, by describing your assets and liabilities and classifying your sources of income.