Financial analysis made easy (and quick!)

What is financial analysis?

Financial analysis is widely used by company management. It allows you to assess how stable the company is and to identify possible risks of bankruptcy. Also distributed financial analysis in the practice of auditors and appraisers. They use the methods of financial analysis and banks when making decisions about granting a loan. Accountants use financial analysis in the preparation of explanatory notes to the annual accounts.
There are six key methods that are used in financial analysis. These include horizontal and vertical analysis, trend analysis, analysis of relative indicators, comparative and factor analysis. With a horizontal analysis, each indicator is compared with the previous period, with a vertical one, the specific weight of each item (income or expenditure) in the overall structure is determined. It also analyzes the factors that influenced the overall result.
An integral part is the trend analysis, which is made in order to analyze the trends. For example, the increase in the share in sales of one product against the background of reduction is another. All financial indicators are compared to each other to determine correlations. In the course of a comparative analysis, the company's performance is compared with data on competitors, as well as with industry average values. Without such a comparison, the data on competitors is not informative.
In the course of financial analysis, quantitative and qualitative methods are used. They include analysis of assets and liabilities of the company, its liquidity, financial stability, solvency, asset turnover.
Financial analysis can be classified for various reasons. From the user's point of view, the internal one, which is carried out by the company's own specialists, and external financial analysis are distinguished. In the latter case, it can produce appraisers or auditors. In the direction of the analysis, a retrospective and perspective analysis is distinguished. In retrospective analysis of past financial activities.A prospective analysis identifies financial plans and forecasts. According to the degree of depth of the study, express analysis and detailed financial analysis are distinguished.
Financial analysis can be directed to various indicators. In this case, there is an analysis of financial statements, which is carried out according to the financial statements; investment analysis devoted to the study of investment and capital investment; technical analysis, in the field of view which falls the dynamics of the company's securities.

Video: Introduction to Financial Analysis

Images: What is financial analysis? What is financial analysis?
Images: What is financial analysis? What is financial analysis?
Images: What is financial analysis? What is financial analysis?