Following are the various tools that are generally used to analyze financial statements. They are

(i) Comparative Statements
(ii) Common-size Statements
(iii) Trend Analysis
(iv) Statement of changes in Working Capital
(v) Funds Flow Analysis
(vi) Cash Flow Analysis
(vi) Ratio Analysis
(vii) Cost-Volume-Profit Analysis.

Comparative Statements:- Statements showing financial data of Balance Sheet or Profit & Loss Statement for two or more than two years, placed side by side to facilitate comparison are called Comparative Financial Statements. This type of analysis is called Horizontal Analysis.

Common-size Statements:- Common-size statements are statements in which individual components or items of financial statements of two or more years are placed and then converted into percentages taken from a common base. This type of analysis is called Vertical Analysis.

Ratio Analysis:- An analysis of financial statements with the help of ratio may be termed ratio analysis, It describes the relationship which exists between various items of a Balance Sheet and a Profit and Loss Account of a firm.

Cash Flow Statement:- Cash flow Statement may be defined as the statement showing 'Cash inflows' and Cash 0utjlows of an organization during a specific period. The difference between the 'inflow' and 'outflow' of cash is the 'net cash flow'.