How to analyze business activity

Analysis of the business activity of the enterprise should characterize the results and effectiveness of its main production activities. Moreover, a reliable assessment of business activity can be obtained as a result of comparison with companies related to the sphere of capital investment. However, such an analysis requires a number of criteria.

The essence of business analysis

The business activity of any enterprise is reflected in its reputation, the pace of economic development and the prospects for marketing products or services. Analysis of business activity, in turn, makes it possible to understand how efficiently the organization’s management works, and how borrowed as well as own funds are used in business activities.

From the point of view of financial analysis, business activity is characterized by indicators of turnover. Accordingly, the assessment of business activity implies the need to determine the turnover ratios for the following components:

- fixed assets;

- current assets;

- assets;

- accounts payable;

- accounts receivable;

- inventories.

The turnover ratios for each of these parameters are determined by the ratio of sales proceeds to the average annual cost of fixed assets, working capital, assets, equity, the amount of enterprise loans, receivables and inventories, respectively.

These coefficients most fully reflect the level of profitability of the enterprise and affect the stability of its financial position in the market.