The analysis of the balance sheet consists of the analysis of all its forms, including the explanatory note and the final part of the auditor's report. It is designed to determine the growth rates of the most significant reporting items, after which the results are compared with the growth rates of sales revenue.
Instructions
Step 1
Start by analyzing the dynamics and structure of the balance sheet. The balance is considered satisfactory if, at the end of the reporting period, the balance sheet currency has increased in comparison with the beginning of the period, while its growth rate is higher than the inflation rate, but not more than the revenue growth rate. The growth rates of current assets became higher than the growth rates of short-term liabilities and non-current assets. Long-term sources of financing should have growth rates and sizes that are higher than the corresponding indicators for non-current assets. The share of foreign currency in equity capital is not less than 50%, and accounts payable and receivable have the same growth rates, sizes and shares.
Step 2
Analyze the financial strength of the organization. Check the absolute and relative indicators, including net assets, net and equity working capital, as well as the coefficients of autonomy, financial dependence, safety of equity capital, flexibility and security.
Step 3
Examine the liquidity of the balance sheet and the solvency of the organization. The balance is liquid if there is enough working capital to pay off short-term liabilities. The analysis consists in determining the main liquidity ratios.
Step 4
Assess the condition of your assets. Determine the efficiency of current assets by means of indicators of profitability and turnover.
Step 5
Conduct an analysis of business activity, determining the level of efficiency of use, the ratio of the growth rates of turnover, profit and advanced capital, as well as other indicators that characterize business activity.
Step 6
Diagnose the financial condition of the organization. Assess the possibilities of loss or restoration of solvency and the use of discriminant mathematical models that determine the likelihood of bankruptcy.
