How to conduct factor analysis

Factor analysis is one of the types of financial assessment of the performance of a particular area of ​​business activity. Factor analysis is used to consider investment, core and financial activities.

Instruction manual

1

Consider all possible options for attracting capital from outside to your business. This will allow you to calculate the size of fixed assets necessary for the purchase of commercial real estate, equipment, payment of licenses, patents, etc.

2

Analyze the condition of current assets, which include the cost of raw materials, stocks of materials; costs of work in progress, finished products. This also includes advances and future expenses.

3

Go to the analysis of the main activity. The goal is profit (loss) from the sale of manufactured goods and services. Compare quality and price, production costs and sales volume. Keep in mind that inflation can affect inflation, changes in legislation or high competition.

4

Assess the internal resources of the enterprise. By properly managing costs and investments, you can increase profits through profitable sales. Both positive and negative dynamics are possible.

5

You must evaluate financial performance. For optimal fundraising, an indicator such as the ratio between equity and borrowed capital is needed.

6

Evaluate your financial capabilities when borrowing funds from banks. If the income is not high enough, you may find yourself in a zone of financial risk when the payment of interest on a loan may be equal to or lower than the income level.

7

Based on the analysis, develop a series of measures that will improve the financial policy of the enterprise or business.

Useful advice

Investment, core and financial activities in business are very closely interconnected. It is impossible to consider one factor without the other. Effective management of all these economic indicators leads to maximum profit.