Financial information is a digital expression of the activities of a particular enterprise. It is reflected in annual reports, tax returns and balance sheets. The ability to read financial information allows a leader to make decisions, as well as analyze and plan further actions for the development of the company.
Instructions
Step 1
Learn the basics of accounting in order to correctly identify the interacting items of income and expense. Determine what information is needed at the moment to make a decision. This is necessary in order not to get lost in a large amount of data, but to highlight only the required moments. For example, if you are an auctioneer, then you should be interested in the amount of profit and the value of the company's shares, since these are the fundamental data of your personal income.
Step 2
Analyze the performance of the enterprise. These include the balance sheet currency, net assets, authorized capital, sales volume, profit, cash flow and its structure. These values will allow you to determine the main coefficients characterizing the activities of the enterprise, namely liquidity, profitability and turnover.
Step 3
Calculate the profitability of the enterprise to determine the effectiveness of the investment in the organization. To do this, divide the profit before tax by the sales proceeds. The first value in accounting is reflected 99.1 "Profit", and the second - on account 90.1 "Revenue". The analysis of this indicator should be carried out in dynamics and compared with the industry average values.
Step 4
Calculate the company's liquidity ratio, which determines the ability of assets to be sold at market prices. In this case, the current assets reflected in line 290 of the balance sheet in form No. 1 and reduced by the amount of accounts receivable in line 230 must be divided into short-term debt liabilities determined by the difference between lines 690, 640 and 650. If current assets are higher than liabilities, this indicates about the successful functioning of the company.
Step 5
Determine the turnover ratio, which characterizes the efficiency of using assets in relation to the volume of sales. It is determined according to the balance sheet according to Form No. 1 as the ratio of line 010 to the sum of lines 190 and 290.
