Role of Financial Analysis on Exploring Firm Performance

Abstract

This study examines the role of financial analysis in the context of exploring firm performance. It has been analysed that financial analysis is evaluating in the form of liquidity ratio, working capital ratio, asset turnover ratio, efficiency ratio and profitability ratio that leaders towards firm performance. Today, in the occurrence of highly competitive business environment, it has been critically analysed that financial performance plays a dynamic role to know the current market value of companies in market. In this study researcher emphasize in context of role of financial analysis in exploring firm’s performance. Importance of financial analysis is used to determine and examine various organizational financial entity that effectively utilized in the form of stable, solvent, liquid and profitable that enough to warrant a monetary investment in nature. After analysing data it has been proved that liquidity ratio is positively associated with firm performance as correlational value is .946**. Also, Working capital ratio is positively associated with firm performance as its correlational value is .861**. This study also confirms that asset turnover ratio and debt to equity ratio are also positively associated with firm performance as its correlational values are .931** and .552** respectively. These results also proved and support the framework model of study.