Significance Of Financial Performance Analysis

Interest of various related groups is affected by the financial performance of a firm. Therefore, these
groups analyze the financial performance of the firm. The type of analysis varies according to the
specific interest of the party involved.
Trade creditors: interested in the liquidity of the firm (appraisal of firm’s liquidity)
Bond holders: interested in the cash-flow ability of the firm (appraisal of firm’s capital structure, the
major sources and uses of funds, profitability over time, and projection of future profitability)
Investors: interested in present and expected future earnings as well as stability of these earnings
(appraisal of firm’s profitability and financial condition)
Management: interested in internal control, better financial condition and better performance
(appraisal of firm’s present financial condition, evaluation of opportunities in relation to this current
position, return on investment provided by various assets of the company, etc).