Financial analysis is the process of the study on the financial situation and main financial results of activity of the enterprise with the purpose of revealing of reserves of the further increase of its market value.
This kind of analysis can be performed by the administrative personnel of the enterprise and any external analyst because it is mainly based on publicly available information.
The basis of information support of financial analysis, as noted above, should prepare financial statements. Of course, the analysis can be used additional information, mainly of an operational nature, but it is only of auxiliary character.
The main sources of information for financial analysis can be used:
1. External data (the state of the economy, the financial sector, political and economic conditions; currency exchange rates;- rates of securities, yield on securities;- an alternative of yield;- the financial indicators of other companies;)
2. Internal data (Accounting, reporting; -Management reporting.)
The main objective of financial analysis is to obtain a small number of the key (most informative) parameters giving an objective and accurate picture of the financial condition of the enterprise, its profits and losses, changes in the structure of assets and liabilities, in settlements with debtors and creditors.
As a result, financial analysis is defined as the current financial condition of the company, and expected in the future, the parameters of the financial status.
Thus, financial analysis can be defined as the way of accumulation, transformation and use of information of a financial nature with a purpose:
to assess the current and prospective financial condition of the enterprise;
to assess possible and feasible rates of development of the enterprise from the position of their financial support;
to identify available sources of funds and to assess the possibility and expediency of their mobilization;
to predict the position of the company on the capital market.
Purpose of the financial analysis are obtained by solving a certain set of interrelated analytical tasks
Objectives of financial analysis:
1. Analysis of assets (property).
2. The analysis of the sources of funding.
3. Analysis of solvency (liquidity).
4. Analysis of financial stability.
5. Analysis of financial results and profitability.
6. The analysis of business activity (turnover).
7. The cash flow analysis.
8. Analysis of investments and capital investments.
9. Analysis of market value.
10. Analysis of probability of bankruptcy.
11. A comprehensive assessment of financial condition.
12. Preparation of financial projections.
13. Preparation of conclusions and recommendations.
The types of fin. Analysis:
1)to be floating. From the organization's forms of audit:internal,external(Internal analysis is conducted by employees of the company. Information base of this analysis is much broader and includes any information circulating within the enterprise and useful for making management decisions. Accordingly dilate and analysis capabilities. External financial analysis is carried out by analysts that are outsiders to the enterprise and therefore do not have access to the internal information database company. External analysis is less detailed and more formalized.)
2)hung. Volume of studies: full, theme
3) hung. Volume analysis: the enterprise as a whole, by subdivision or structural unit, the individual fin. Operations
4) hung. From the time the survey: preliminary, current, subsequent
For specific tasks of financial analysis applied a number of special methods that allow you to quantify certain aspects of the activities of the enterprise. In financial practice depending on used methods distinguish following system of financial analysis undertaken by the company: trend following, structural, comparative and ratio analysis.
1. Trend (horizontal) financial analysis is based on the study of the dynamics of selected financial indicators in time. In implementing this analysis calculates the growth rate (growth) of individual indicators and identify General trends in their changes (or trend). The greatest distribution was received by following forms of the trend (horizontal) analysis:
1) comparison of financial indicators the reporting period, with the figures of the previous period (for example, indicators of the previous decade, month, quarter);
2) comparison of financial indicators the reporting period compared to the same period last year (for example, the indicators for the second quarter of the year with the same indicators for the second quarter of the previous year). This form of analysis is used in companies with pronounced seasonal characteristics of the business activities;
3) comparison of financial indicators for a number of preceding periods. The purpose of this analysis is to identify trends in individual indicators characterizing the financial performance of the company. The results of this analysis are usually graphically in the form of line graphs or bar charts of change in the indicator in the dynamics.
2. Structural (vertical) financial analysis is based on structural decomposition of the individual scores. In implementing this analysis calculates the specific weight of separate structural components of financial performance. The greatest distribution was received by following forms of the structural (vertical) analysis: analysis of assets, capital, and cash flows.
3. Sravnitelnaya the analysis is based on comparison of the values of individual groups of similar financial indicators among themselves. In implementing this analysis calculates the dimensions of absolute and relative deviations of the compared indicators. The greatest distribution was received by following forms of comparative analysis: analysis of the financial results of the company and the industry average indicators, analysis of the financial performance of the enterprise and the enterprises of competitors, analysis of financial performance of individual structural units and divisions of the enterprise, analysis reporting and planning (regulatory) financial performance:
4. Analysis of financial ratios is based on the calculation of the ratio of different absolute values between them. In implementing this analysis identifies the various relative indicators, characterizing different aspects of financial activity. The most widely following aspects of this analysis: financial stability, solvency, asset turnover and profitability.