What is the purpose of a financial statement analysis?

The primary purpose of financial statement analysis is to assess the performance and financial health of a business. This analysis involves reviewing and interpreting a company's financial statements, including the income statement, balance sheet, and cash flow statement, to gain insights into its profitability, liquidity, solvency, and overall financial condition.

By evaluating these aspects, stakeholders such as investors, creditors, and management can make informed decisions regarding investments, creditworthiness, and operational improvements. The analysis provides a comprehensive understanding of how well the business is performing in terms of generating revenue, managing expenses, and maintaining assets and liabilities.

While it is true that financial statement analysis can also be associated with evaluating management effectiveness or predicting future trends, the primary focus lies in evaluating the overall financial performance and health of the company, making the assessment of performance and financial health the most accurate answer.