Cash flow analysis is to analyse the inflow and outflow of cash. Cash is a major ingredient of any business. Without cash, business cannot function smoothly as cash is needed for every transaction. Cash flow statement shows liquidity of the business.
Is the bank’s revenue growing, is it flat or is it declining? This is a major question, which needs to be answered. It has analysed all the top five banks to seek answers to this question. If the bank’s incoming is growing at a rate lower than previous, it has gone through the financial statement to understand the reason for the same. Management usually comments about revenue growth, decline or flat revenue and reasons for the same in a section in annual report known as “Management Discussion and Analysis.”
The second question that has been evaluated is whether the bank is making any profit. This information can be found in the profit and loss statement. As mentioned above, profit margin gives a fair idea of profits as a percentage of sales and figure out any discrepancy compared to previous years’ financials.