Abstract:
Healthy financial performance is important in ensuring the gomg concern of a business.
Financial analysis in the retail sector (supermarkets in this case) is accepted as a major
instrument
in measuring the financial health of a business by academics, practitioners and
regulators in detecting and preventing insolvency. Supermarkets are a popular shopping spot for
residents in Kenya and it is important for management of these enterprises to monitor their
financial health so as to ensure their continued operation. The purpose of this study was to
establish the importance of financial statement analysis in measuring the financial health of
supermarkets in Kenya. The total population consisted of all major licensed supermarkets in
Kenya as at 31
51
December 2018. Since the population of study was small, there was no need of
sampling hence the whole population was used for the study. The study adopted descriptive
survey of supermarkets in Kenya with for focus on the supermarkets that have gone banktupt.
Secondary data was collected from audited financial reports of the banks from 2014- 2018.
Regression Analysis was conducted in order to establish the importance of financial statement
analysis in measuring the financial health of supermarkets. The independent variables included
profitability, liquidity, solvency and stability. The dependent variable was be financial health and
was measured mainly by the
Z-score. The findings from the study confirmed that
financial statement analysis is important in establishing the financial health of a business so as to
make important managerial decisions. The study also revealed that analysis of financial
statements is important for owners and managers to make informed decisions and take
preventive action. The main assumption of the study was that managers prepare financial
statements in good faith to reflect a true and fair view of the company's performance. 'The study
therefore suggests that analysis of financial statements of supermarkets should be conducted
carefully mainly by managers, owners, investors and suppliers. It also recommends that financial
statements be prepared
Altmari's
in
a manner that will facilitate financial analysis.
