How to conduct an economic analysis

Economic analysis is a systematic information that is designed to identify all the punctures of the enterprise and ensure the greatest efficiency of its work. This type of analysis can be carried out by a specialist who is well versed not only in accounting, but also in the economy as a whole.

Instruction manual

1

Decide on the type of economic analysis: external or internal; technical and economic, economic and legal, etc.; preliminary, current, etc.; macro or microanalysis, etc.

2

Form and select the information, which should be:

- appropriate (to influence the adoption of management decisions;

- reliable, i.e. truthful, without falsified results of the company’s activities and one that is easy to verify with the help of primary documents;

- neutral - without benefit to any one group;

- understandable - easily perceived without special training;

- comparable, for example, with information from other organizations;

- rational, the selection of which would be carried out at minimal cost;

- confidential - i.e. not containing data that could harm the company and its strong positions.

3

Perform analytical data processing with the preparation of analytical tables and the balance sheet, where the articles are grouped into enlarged groups with the same economic content. Such a balance is convenient for reading and conducting a qualitative economic analysis.

4

Based on the groups received, calculate the main indicators of the financial condition of the enterprise - liquidity, financial stability, turnover, etc. Please note that with such a balance transformation, the balance remains - the equality of asset and liability.

5

Perform a vertical and horizontal balance analysis. In a vertical analysis, accept the amount of assets and revenue for 100% and divide the interest on the items according to the figures presented. In horizontal analysis, compare the main balance sheet items with previous years, placing them in adjacent columns.

6

Compare all indicators with industry standards.

7

Summarize the results of economic analysis. Based on the information received, give an objective assessment of the enterprise, make suggestions on identifying reserves to improve the efficiency of the enterprise.