Financial analysis is crucial for understanding a company's financial health and making informed decisions. Different methods like common-size analysis, vertical analysis, and DuPont analysis are used to evaluate a company's financial position. These methods help in analyzing profitability, liabilities, liquidity, and stability. By examining financial statements, managers can gain insights into the company's operations and make strategic decisions. The goal is to provide a clear picture of the company's financial situation by analyzing data from different years.