General

Financial analysis of the company

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A thorough analysis of a company’s financial condition is one of the components of commercial success. The analysis of activity allows to estimate a company’s current position, consider risks and favorable factors, make an adequate forecast for the future. Aims and tasks of enterprise financial analysisFinancial analysis is performed to make reasonable management decisions.Enterprises conduct both external and internal analysis:internal analysis is carried out by employees of the company, using a broader base (not only data from open reporting but also specific internal reporting, down to what the percentage of rejects and claims for a particular type of product) and a greater degree of detail (that is, not only the overall result of the company but also local indicators of individual departments are studied); most often the data of internal financial analysis are not made public and can be quite specific, they reflect not only the results but also external analysis is performed by outside specialists, representing the interests of business (partners, creditors, investors), controlling bodies (for example, Federal Tax Service), mass media, scientific organizations; the purpose of

the external analysis is: determination of the degree of riskiness of investing capital into an enterprise, forecasting of possible return on investment, the competitiveness of the firm; reports are formalized to the maximum. Also, financial analysis of an enterprise may befull, thematic (depending on the volume);preliminary, current (or operative), retrospective (depends on the period for which the analysis).Tasks are subordinated to the purpose and type of research, among them:complete, objective, and timely assessment of the state of the company’s finances at the reporting date;Identification of the reasons that led to this state of affairs;discovery of reserves and resources (possibly unused) that can be used to optimize the company’s financial performance;elaboration of specific steps aimed at improving the financial condition of the company;forecasting of financial results of future periods.Data sources for the analysisDepending on the customer, the sources of information are also selected. All of the above documents can be used, or part of them.Balance sheet. It reflects the assets and liabilities of the company at the beginning and end of the reporting period.Statement of Income or Statement of Financial Results . This document reflects both the total financial income (sales volume) and expenses, net profit, and loss.

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