How to make a financial analysis of the enterprise

Entrepreneurship requires constant planning and analysis of the financial performance of the company. This is the basis for the effective management of all stages of production and the development of methods for obtaining the greatest profit.

Instruction manual

1

The financial analysis of the enterprise is aimed at studying its main economic indicators that ensure financial stability in the corresponding market niche. The stability of the enterprise is a guarantee of constant profit, an indicator of reliability for potential investors and shareholders.

2

In the framework of financial analysis, the formation of the so-called analysis information base is carried out. The base is a set of financial indicators for which an assessment is made. It includes: tangible assets, sources of financing, liquidity ratios, value of trade turnover, cash flows, investments, pricing methods, bankruptcy conditions. Based on the analysis, results are summarized and forecasts are output.

3

A financial analysis of an enterprise can be either internal or external. Internal analysis is performed by employees of the company itself, external - by third parties. The first type of analysis is carried out at the end of a certain reporting period. The second - when selling or buying a company, conducting special checks (audits), while an additional verification of the reliability of the data provided can be carried out.

4

There are several areas of financial analysis: horizontal, vertical, comparative, trend, analytical and factor. The horizontal analysis method involves comparing current indicators with historical data to identify dynamics. Vertical analysis involves a review of the overall structure of the entire base of indicators and further study of the impact of each of them on the whole picture.

5

A comparative analysis provides a comparison of similar financial indicators between divisions, workshops, subsidiaries, as well as between the general indicators of the company with similar competitors, if such information is available.

6

Trend analysis shows the general trend of indicators from period to period. Trend building helps in predicting the future organization, drawing up long-term preliminary plans.

7

The analytical direction of financial analysis allows you to identify certain relationships and patterns between similar indicators of different firms, for example, the grouping of companies by structure or amount of share capital, by value of fixed assets or profit. This direction is also called analytical grouping.

8

Factor analysis is the study of the influence of individual factors on changes in financial indicators, for example, how the increase or decrease in price will affect the volume of production, or how the replacement or modification of equipment will affect the total profit, etc.