Palak R.

Most of my friends have very well defined accounts and finance. Let me give very simple example: Say Company A makes 1 crore profit and Company B make 10 crore profit. This profit results are given by accounting rules. Now if i ask u to choose which company looks good to u. Primafacie you may say Company B looks more good. But if you further analyse and ask the question on how much sale or assets was this profit generated. let say company A created 1 crore profit on 10 cr sale which is 10% profit. Whereas company B created10 cr profit on 1000cr sale which means 1% profit. so now your decision changes. Company A looks good. we are analyzing the company using ratio analysis. Like this in finance we have various techniques to interpret,analyze and make decision. Accounts uses accounting rules and generates statements like profit and loss account, balance sheet,cash flow statement. Finance applies various techniques like ratio(as above) to make decision.