What does the process of analysing involve in the context of financial reports?

In the context of financial reports, the process of analysing primarily involves examining the relationship between various items in those reports. This analysis helps to uncover insights and trends that are critical for understanding a company's financial health and performance over time. By focusing on the relationships among different financial metrics, analysts can assess how changes in one area, such as expenses or revenue, can impact others, like net profit or cash flow.

While identifying changes or differences in reports is an important aspect of financial analysis, it is not the sole definition of the process. Financial analysis goes beyond merely noting differences; it includes interpreting the implications of those differences and understanding how they relate to overall business performance. Hence, examining the relationship between items covers the broader context of what financial analysis entails, making it a more comprehensive description of the process.