What is it?
Financial statements when presented by itself do not give external users detail on how the firm is actually performing which is why analysis and the interpretation of financial statements is important because they make the financial data in financial statements useful for external users to make economic decisions.
Why is it Necessary?
The analysis and interpretation of financial statements is necessary when wanting to assess the performance of a company. External users can use a range of financial ratios to assess the company’s performance throughout the year.