The primary task of the financial analysis of the company is to objectively assess the results of activities by the head and identify possible problems in the business. To do this, you must be able to read the statements and draw appropriate conclusions on its basis. The results of the reporting are subsequently required to be presented to the top management of the company or shareholders to adjust management decisions.
Instructions
Step 1
Prepare financial statements of the company to be analyzed and studied. It includes a profit and loss statement, balance sheet, cash flow statement, explanatory note.
Step 2
Develop a list of indicators that will help assess the efficiency of the enterprise and choose a convenient form of information presentation that reflects the real state of affairs in the company.
Step 3
Instruct the financial and economic service of the company to form a consolidated report, which should contain answers to the questions: - how to reflect changes in the financial condition of the company in an accessible and visual form; - what indicators should be included in the list to reflect the full picture of the company's work; - what are the measures, which will help to change the current situation for the better.
Step 4
Conduct a "horizontal" balance sheet analysis. To do this, compare the indicators of each section of the asset and liability of the balance sheet with the data of the previous period. Determine what part of the company's liabilities formed its asset.
Step 5
Carry out the so-called "vertical" analysis, sequentially determining the specific weight of each balance sheet item in the total amount of the section. Calculate the debt to equity ratio to assess the company's creditworthiness.
Step 6
Based on the dynamics of balance sheet items, outline a plan for improving performance for the next period. Include items such as increasing working capital, paying off accounts payable, increasing stocks of raw materials and supplies, and so on.
Step 7
Estimate the company's profitability indicators. Include in consideration the return on sales, defined as the ratio of the profit from sales to the cost of goods sold.
Step 8
Calculate your return on equity. For this, use section III of the balance sheet, that is, data on the ratio of net profit to the company's own funds. This reporting unit is required, first of all, by the owners of the company to determine the income received from the funds invested in the business.
Step 9
Analyze the liquidity indicators. This characteristic determines the level of the company's solvency and its ability to pay off short-term liabilities. The current liquidity ratio is calculated as the ratio of current assets to short-term liabilities.
Step 10
Based on the results of reading financial indicators, develop a set of measures that will eliminate weaknesses in the business. Plan for shortening the terms of commodity loans and tracking late payments in a timely manner, and consider moving to prepaid deliveries. Assign people responsible for the implementation of the planned activities, setting a reasonable time frame and thinking about the control system.
