In the process of financial statements analysis it is possible to use the whole range of
different instruments and procedures. First of all, it considers comparative financial
statements and the horizontal analysis procedure together with structural financial
statements and the vertical analysis procedure. By horizontal analysis which is based on
the comparative financial statements we try to examine the tendency and dynamics of
changes of particular basic financial statements positions. We estimate business
efficiency and security of the company on the basis of observed changes. On the other
hand, structural financial statements are the base for vertical analysis which allows insight
into financial statement structure. Financial statements structure is very significant in the
context of business quality.
By financial statement analysis we get acquainted with the business quality, but the
questions of the analysis are not solved by horizontal and vertical analysis procedures of
balance sheet, profit and loss account and cash flow statement. In the context of
measuring business quality on the basis of financial statements, the most significant are
different financial ratios formed from basic financial statements.
Financial ratios application in assessing small and medium-sized entities’
business quality