Financial statement analysis has traditionally been seen as part of the fundamental analysis required for equity valuation. But the analysis has typically been ad hoc. Drawing on recent research on accounting-based valuation, this paper outlines a financial statement analysis for use in equity valuation. Standard profitability analysis is incorporated, and extended, and is complemented with an analysis of growth. An analysis of operating activities is distinguished from the analysis of
financing activities. The perspective is one of forecasting pay offs to equities. So financial statement analysis is presented as a matter of pro forma analysis of the future, with forecasted ratios viewed as building blocks of forecasts of payoffs. The analysis of current financial statements is then seen as a matter of identifying current ratios as predictors of the future ratios that determine equity pay offs. The financial statement analysis is hierarchical, with ratios lower in the ordering identified as finer information about those higher up. In This Paper main focus was on the variables of equity valuation ratio analysis. Before investing in any sector an investor should concentrate on these variables.....