Important objectives of financial analysis are as follows :

1. Efficiency evaluation: Business entity acquires different assets as per the nature of business with the help of this assets production and sales are done and services are provided. The use of these assets should be at maximum level. Maximum use of assets generates more earning. Through financial analysis, the evaluation of the efficient use of assets can be done.

2. Evaluation of earning capacity: Generally, financial statements are prepared for the duration of 12 months. This analysis is made with the help of different accounting ratios and future earning capacity of the entity can also be forecasted. Mostly all stakeholders, gather information of present and future earning through this analysis for their
investment decision.

3. Solvency evaluation: Solvency evaluation has two types: Short term and long term solvency. The goods and service providers to the business measure the short term solvency and banks and financial institutions measure the long term solvency of business entities for their loan amount.

4. Evaluation of managerial efficiency: The owners and the management are two different entities in the company form of business. Therefore, through financial analysis evaluation of effectiveness and fairness of the decisions of the board of directors can be done. The performance evaluation of the officers can also be done throught this analysis.

5. Planning for budget: Budget means the quantitative planning or statistical planning of future objectives in present. What will be the future sales? How much purchase is required? How much will be the production? How much cash will be required? What will be the revenue expenses? What will be the capital expenses? etc. are estimated. Analysis of financial statements is useful to make the process of budget effective.

6. Comparative Study: Two types of comparisons can be done through financial analysis. In the first comparison, the business entity can compare its currents with the accounts of past. Different aspects of business entity like profitability, liquidity, solvency and efficiency etc. of the current year can be compared with the previous year to know the growth of the above-mentioned aspects.

7. Simplicity to understand accounts: Financial accounts are prepared on the basis of determined rules, principles and terminology. It is possible that all the users of financial accounts may not have full knowledge pertaining to financial accounts. Under these circumstances, financial statements analysis helps to understand the financial accounts. In financial analysis, the presentation of financial accounts is done in various ways. It provides simplicity to the users to understand financial accounts.