Economic financial analysis

Economic financial analysis. Application of a set of techniques used to diagnose the situation and prospects of the company in order to be able to make the right decisions at the right time. They constitute a form of information on the progress of the entity. Both internal management and external stakeholders: banks, creditors and global organizations, as well as for tax purposes.

They constitute a management report that attest to success or failure and give warning signs of the difficulties of a company. The internal arrangements of the accounting system and the meaning of different financial relationships must be understood to interpret the data of a company. In order to achieve an optimal analysis and interpretation of the financial situation of an entity, as much information as possible must be possessed, that is, it is not enough only to obtain the main Financial Statements; the different reports and documents attached thereto must also be consulted, due to to that the Financial Statements are only a tool that helps the user to evaluate, value, predict or confirm the performance of a business,


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  • 1 Importance
  • 2 Essential elements for the Financial Economic Analysis
    • 1 Techniques for carrying out the analysis of the Financial Statements
  • 3 Object
  • 4 Special sphere of knowledge
  • 5 Comprehensive evaluation
  • 6 Information assurance
  • 7 Dynamic Financial Analysis Instruments
  • 8 Approach to the Analysis of the Financial Statements
  • 9 Methodology for the analysis of the basic states of the Accounting
    • 1 First Stage
    • 2 Second Stage
    • 3 Third Stage
    • 4 Fourth Stage
    • 5 Fifth Stage
  • 10 Support tools for Financial Economic Analysis
    • 1 Balance Sheet
      • 1.1 Elements
      • 1.2 Support criteria
      • 1.3 Balance Sheet Types
        • 1.3.1 Comparative
        • 1.3.2 Consolidated
        • 1.3.3 Estimate
        • 1.3.4 Pro forma balance sheet
        • 1.3.5

Presentation of the Balance

  • 2 Income statement
    • 2.1 Elements
    • 2.2 Support criteria
  • 3 Statement of Cash Flows
    • 3.1 Flow variables
    • 3.2 Cash flow
    • 3.3 Cash flow
    • 3.4 Net Cash Flow
  • 4 Other Financial Statements
    • 4.1 Projected
    • 4.2 Audited
    • 4.3 Consolidated
    • 4.4 Rules and Principles for preparing the Statement of Cash Flows
      • 4.4.1 Declaration No.95
      • 4.4.2 CPC 4 Statement of Cash Flows
      • 4.4.3 IAS 7 Statement of Cash Flows
    • 4.5 Statement of cash flows for decision-making in companies
  • 11 Other States
    • 1 Financial Operation of the Public Sector
    • 2 Budgetary
    • 3 Primary of the Public Sector
    • 4 Statement of Operations
    • 5 Compensated Operations
    • 6 Open Market Operations
    • 7 Virtual Operations
  • 12 Sources


There are several questions that employers and managers must answer:

  • Does the company make enough profits?
  • What is your financial strength?
  • Do you receive or grant too many credits?
  • Do you have an excessive stock level?
  • Does liquidity improve or worsen?
  • Does productivity go up or down?
  • Will the expected cash income during the period be appropriate to satisfy the payments?
  • Does the company have sufficient financial flexibility to survive a period of adversity if the expected cash flows do not materialize?

These and other questions can only be answered in economic and financial analysis. Currently, entities must gain in culture and knowledge in the use of financial-financial analysis tools of Financial Statements , an aspect of vital importance due to the need to be more efficient, effective and economical every day, in a historical context where The financial and economic crisis is intensifying internationally, as well as the presence of the imperialist blockade to which we are subjected. As of 2005 with the issuance of Ministerial Resolution No. 235 of the Ministry of Finance and Prices, the Cuban Financial Reporting Standards are put into effect and in its Cuban Accounting Standard No. 1 Presentation of Financial Statements it is exposed in one of its paragraphs that annexed to the set of Financial Statements, financial analysis reports may appear, among others, with a view to a better interpretation of the quantitative expression of these, which represent past data, but constitute the basis for future decision-making.

Essential elements for the Financial Economic Analysis

For the assessment to be useful, relevant and reliable, the analyst, who can be an internal or external user of the entity, must take into account elements, such as:

  • Master the content of the accounts expressed in the Financial Statementsto understand the economic and financial information.
  • Have explanatory notes and accounting policies.
  • Know the specific characteristics of the entity.
  • Have other resources such as: the human factor, technical capacity, technology, administration, and creativity of man.
  • Impact of changes in accounting methods.
  • Changes in the economic, political and social environment; and the responses of the economic entity.
  • Mastery of the techniques for carrying out the analysis, depending on its scope; provided for in the objective to be achieved.
  • Not carrying out the analysis in a superficial way, which leads to erroneous conclusions, being able to identify the cause of the cause.

Necessarily, the manager and the administrative personnel, among others, require for the satisfactory achievement of their management, to master the techniques of analysis of the Financial Statements, so that it constitutes a working instrument and allows them to periodically carry out the diagnosis, with a view to delimit which are the problems it presents, which are not always external in many cases represent internal situations; This would facilitate the implementation of the decision-making process in aspects such as: operational solutions, preparation of plans, preparation of action programs, design of policy and establishment of objectives.

To achieve positive results in the Financial Statements, it is necessary to act efficiently and with organization, as well as maintain sufficient working capital to face the obligations contracted and achieve favorable evaluations in financial audits, to achieve the appeal; Knowing the techniques will facilitate the systematic financial economic analysis and not only at the end of the accounting period, but in the intermediate closings, favoring the diagnosis, of how the entity is financially, of the use of the resources available to achieve of your goals and the use of appropriate techniques.

Techniques for carrying out the analysis of the Financial Statements

  • Changes in weights and percentage or horizontal method.
  • Common size or vertical method.
  • Financial and economic reasons.
  • Consecutive substitutions.
  • Historical trends or series.
  • Projected analysis.
  • Dupont method.
  • Economic risk.
  • Financial balance.
  • Contribution margin.
  • Productivity, average salary, correlation average salary – productivity, and others.

These techniques, regardless of the scope of the analysis, which generally affects the determination of the economic situation, the results and changes in the financial situation, contribute to a better diagnosis and, therefore, to sound decision-making. The user of accounting information can determine aspects such as: solvency, liquidity, ability to generate resources, composition of the statements, financial, economic risk, origin and characteristics of financial resources, as well as, origin, destination, performance, and management qualification of managers and administrators, among others, but, in summary, they provide answers to questions such as: Profitability? Financial Condition? .

Converting the analysis of the Financial Statements, as a working method at the intermediate and annual closing, will contribute to minimizing the risk in making wrong decisions and achieving better results with the rational use of material, financial and human resources. available. We cannot ignore our increasingly aggressive environment, where business activities must take into account the approach of comrade Raúl Castro ; President of the Republic in the 1st ordinary session of the VII Legislature of the National Assembly of People’s Power on July 11 , 2008 .

“The less resources there are, the more discipline is required the more you have to anticipate, plan, organize, demand and save”


Economic-financial analysis also has its own object of study in which the financial-economic processes of organizations that are shaped by the action of objective and subjective factors are understood.

Special sphere of knowledge

Economic-financial analysis as a science constitutes a special knowledge system related to:

  • The investigation of financial economic processes and their interrelations formed under the action of economic laws and subjective factors.
  • The scientific basis of the plans, the commitments and the objective assessment of their fulfillment.
  • The discovery of negative and positive factors and the quantitative measurement of their action.
  • The discovery of the trends and proportions of financial economic development and the disclosure of unused internal reserves.
  • The generalization of cutting-edge experience, with the adoption of optimal management decisions.

Comprehensive evaluation

An important place in the comprehensive financial-economic analysis system is occupied by the assessment of management activity, which consists in reaching general conclusions about the final results on the basis of a quantitative examination of the financial-economic processes reflected in the set of indicators. The evaluation of the action of the object is carried out, in the first stage by the integral financial-economic analysis when the main directions of the analytical work are determined, prior evaluation in the final stage when the final analysis is carried out Final Evaluation. The final evaluation is an informative source for the rationale and adoption of optimal decisions in specific situations.

The comprehensive evaluation of the management activity consists of the characterization of this action obtained as a result of a comprehensive investigation, that is, the simultaneous and compatible study of the set of indicators that reflect all or many of the aspects of the economic and financial processes and that contain generalizing conclusions about the results of these utilities supported by the clarification of the quantitative and qualitative differences regarding a basis of comparison, the plan, the norms, the previous periods, the achievements of other similar objects, other possibilities of development variants.

Informational assurance

The analysis is based on the economic information system, which in turn rests on the foundations for making optimal management decisions.

Mathematical information theory investigates the procedures to define and quantify the amounts of information. Study the processes of its conservation and its transmission through communication channels . It starts from the data destined for storage in memory devices or for transmission through communication channels.

Dynamic Financial Analysis Instruments

  • Financial Statement Comparisons
  • Indexes on the Reference of previous Years
  • Ratios of the same company from the previous period to study its evolution.
  • Ratios provided by the company for a certain period. So you can compare what the company had set itself as a target with reality.
  • Sector-type ratios to check whether the company obtains the profitability it would have to have depending on the economic sector in which it operates.
  • Ratios of the company’s main competitors. The entity may be interested in comparing its ratios with more direct competitors.

Approach to the Analysis of the Financial Statements

  1. Define the Analysis Objective.
  2. Define the Analysis method.
  3. Determine the applicable analytical instruments.
  4. Interpret and diagnose.
  5. Presentation of the Results of the analysis.
  6. Issue recommendations.

Methodology for the analysis of the basic accounting statements

First stage

  1. Prepare a comparative financial statement of the statement of position of the previous year, with a horizontal analysis of the variations.
  2. Prepare a comparative Financial Statement of the Income Statement, with a vertical analysis to determine the structure of Expenses and the results regarding income.
  3. Calculate the different ratios required for the analysis
  4. Group income and expenses by Productive and Service Areas, broken down, to evaluate their behavior.
  5. Prepare accounts receivable by age, to assess their aging, and the entity’s collection policy.
  6. Make the calculation of the break-even point of each productive area and the total of the company.

Second stage

  1. Evaluation of the Analysis Results.

Third stage

  1. Presentation of the Analysis Results.

Fourth Stage

Fifth stage

Support tools for Financial Economic Analysis

  • Balance sheet
  • Statement of income
  • Cash flow statements
  • Others

Balance sheet

Accounting document that reflects the financial situation of a company at a moment in time. It consists of two parts, active and passive. The asset shows the assets of the company, while the liability details its financial origin. Legislation requires that this document be a true image of the company’s equity status.

It is an accounting document that reflects the financial situation of an economic entity, whether of a public or private organization, at a certain date and that allows a comparative analysis to be made of it; includes assets, liabilities and stockholders’ equity. It is formulated according to a standard format and criteria so that the basic information of the company can be obtained uniformly, such as: financial position, profit capacity and funding sources.


  • Assets: They are all the assets and rights of your properties, capable of generating income in the future. These must be ordered for their provision according to their liquidity or based on the period needed to convert it into cash, which is why they are classified as: current, investments, permanent, long-term, deferred fixed and others.
  • Liabilities: They are the debts, commitments or obligations contracted that come from transactions, with the aim of financing assets that constitute the entity. They represent the part of the assets that have been financed by third parties. And they must be ordered according to the priority with which they must be liquidated, hence they are classified as: long-term, deferred, and others.
  • Capital or equity: Represents the contribution that the owner has in the company for a given date known as the difference between assets and liabilities. It is the part of the assets of the entity that are financed by the owners.

Assets are usually subdivided into fixed assets and current assets. The first includes the movable and immovable property that constitutes the physical structure of the company, and the second includes the treasury, collection rights and merchandise. In liabilities, a distinction is made between own resources, long-term liabilities and current liabilities. The first are the funds of the company (share capital, reserves); the long-term liabilities are the long-term debts (loans, obligations), and the current liabilities are short-term foreign capital (commercial credit, short-term debts).

Support criteria

  • Systematicity: Monthly.
  • Flexibility: Adapt to the characteristics of the entity and the needs of each moment.
  • Homogeneity: The indicators used must be homogeneous in such a way that they can be added and compared with similar entities.
  • Unity and Opportunity: The results of the analysis should be useful and timely for financial decision-making – it should put the red flags on unwanted deviations and be used as operational management tools and measure the efficiency of the organization.
  • Simplicity: The indicators must be few and the calculation procedures simple without synthesizing the financial efficiency of the entity.
  • Disaggregation: It must be disaggregated by organizational units and activities.

There are different types of balance depending on the time and purpose. It is the basic statement demonstrating the financial situation of a company, as of a given date, prepared in accordance with the basic principles of government accounting.

Balance Sheet Types


Financial statement in which the different elements that comprise it are compared in relation to one or more periods, in order to show the changes that have occurred in the financial position of a company and facilitate its analysis.


It is one that shows the financial situation and results of operations of an entity made up of the holding company and its subsidiaries, as if they all constituted a single economic unit. It is formulated by replacing the investment of the holder in shares of subsidiary companies, with their assets and liabilities, eliminating the balances and operations carried out between the different companies, as well as the profits not realized by the entity. Other balance sheets


It is a financial statement prepared with preliminary data, which are usually subject to rectification.

Pro forma balance sheet

Financial statement showing tentative amounts, prepared to show a proposal or probable future financial situation.

Presentation of the Balance

The presentation of the different accounts that make up the balance can be done according to their increasing or decreasing liquidity order. The method is increasing when the assets with the highest liquidity or availability are presented first, followed by the other accounts in this order of importance. The balance sheet is said to be classified in order of liquidity and decreasing enforceability, when fixed assets are presented first and finally, with that order being realized or current assets.

Statement of income

Accounting document that shows the result of operations (profit, remaining loss and surplus) of an entity during a given period.

It presents the financial situation of a company at a certain date, taking as a parameter the income and expenses incurred; provides the net profit of the company. It generally accompanies the Balance Sheet.

State that shows the difference between the total income in its different modalities; sale of goods, services, fees and contributions and expenses represented by costs of sales, cost of services, benefits and other expenses and products of the entities of the Parastatal Sector in a given period. It presents the main changes that occurred in the financial structure of the entity and its final reflection in cash and temporary investments over a given period. The expression “constant pesos” represents pesos of purchasing power as of the balance sheet date (last reported year for comparative financial statements).


  • Income: They are all those operations that the company carries out and that result in increases in the capital of the companies, for example: sales, interest earned, income from commissions, profits obtained from sales of fixed assets, income from rental of premises owned by companies and others.
  • Expenses: These are expenditures in which the company incurs and which results in decreases in capital. Within this large group are the cost of the product or the cost of the item to be manufactured in the case of an industrial company and the rest of the expenses that the company necessarily has to incur in order to complete the operations process.

Support criteria

  • Systematicity: Monthly.
  • Flexibility: Adapt to the characteristics of the entity and the needs of each moment.
  • Homogeneity: The indicators used must be homogeneous in such a way that they can be added and compared with similar entities.
  • Unity and Opportunity: The results of the analysis should be useful and timely for financial decision-making – it should put the red flags on unwanted deviations and be used as operational management tools and measure the efficiency of the organization.
  • Simplicity: The indicators must be few and the calculation procedures simple without synthesizing the financial efficiency of the entity.
  • Disaggregation: It must be disaggregated by organizational units and activities.

Statement of cash flows

EFE is understood as the basic financial statement that shows the changes in the financial situation through the company’s cash and cash equivalent in accordance with the Generally Accepted Accounting Principles (GAAP), that is, in accordance with the International Standards of Accounting (NICs). The EFE offers the entrepreneur the possibility of knowing and summarizing the results of the company’s financial activities in a given period and being able to infer the reasons for the changes in its financial situation, constituting an important aid in cash management, control of the capital and in the efficient use of resources in the future.

Flow variables

Movement or circulation of a certain variable within the economic system. The flow variables assume the existence of an economic current and are characterized by a temporal dimension; they are expressed as necessary in quantities measured over a period, such as consumption, investment, production, exports, imports, national income, etc. The flows are intimately related to the funds, since some come from the others.

In this way, the fund variable “fixed assets” gives rise to the flow variable “rents”, while the flow variable “wheat production in period X” gives rise to the fund variable “stored wheat”.

The one that in advance, shows the exits and inflows in cash that will be given in a company during a certain period. Such period is normally divided into quarters, months or weeks, to detect the amount and duration of the shortage or surplus of cash.

Cash Flow

Statement showing the movement of income and expenses and the availability of funds as of a given date. Movement of money within a market or an economy as a whole.

Cash flow

Movement of inflow and outflow of cash showing the interrelationships of resource flows between the private, public and external sectors, which occur both in the real sector and through the financial system.

Net Cash Flow

It is the difference between net income and net disbursements, discounted at the date of approval of an investment project with the “present value” technique, this means taking into account the value of money as a function of time.

Other Financial Statements


Financial statement at a future date or period, based on estimated calculations of transactions that have not yet been performed; it is an estimated statement that frequently accompanies a budget; a pro-forma state.


They are those who have gone through a process of reviewing and verifying the information; This examination is carried out by independent public accountants who finally express an opinion about the reasonableness of the financial situation, results of operations and flow of funds that the company presents in its financial statements for a particular year.


Those that are published by legally independent companies that show financial position and profit, just as if the companies’ operations were a single legal entity.

Rules and Principles for the preparation of the Statement of Cash Flows

Statement No.95

Statement No. 95 establishes standards for the cash flow report, replaces opinion No. 19 of the APB; requires a statement of cash flows as part of the financial statements for all companies rather than a statement of changes in financial position. The declaration requires that the EFE classify cash collections and payments according to whether they arise from operating, investing or financing activities, and provides definitions for each category.

CPC 4 Statement of Cash Flows

This Peruvian Generally Accepted Accounting Principle was issued by the Research Institute of Accounting and Financial Sciences of the College of Public Accountants of Lima in September 1991. This standard has had as its source of inspiration FASB 95 of the Standard Board. Financial Accounting.

For most entities it will not be difficult to comply with this standard; however, for banking companies and companies with operations abroad they may represent greater difficulties in the preparation and presentation process. The statement of cash flows can be prepared using two methods: Direct and Indirect.

IAS 7 Statement of Cash Flows

Revised in 1992 and applies to the financial statements corresponding to fiscal years beginning on the 1st. of January 1994 or after that date, renders IAS 7 Statement of Changes in Financial Position, approved in July 1977, void.

The application of the statement of cash flows affects all companies, will allow all users to assess changes in the equity of a company, its financial structure and its ability to influence the amounts and timing of its cash flows in order to adapt to changing circumstances and opportunities.

Statement of cash flows for decision-making in companies

  • The value of the information. The information given by the EFE reduces uncertainty and supports the decision-making process in a company; that is why the information provided by this basic financial statement is characterized by its accuracy, by the way it is structured and presented, the frequency in which it is given scope, origin, timing, relevance, timeliness, and by being complete information.

The value of the information given by this basic financial statement is also in the message, the additional economic gain that can be achieved by using such information, etc. The value does not depend on how much information the message contains, but on its relation to the amount of knowledge previously collected and stored.

  • Managerial decisions in business management. The EFE aims to provide fresh information that allows the respective instances to continue in the search for the objectives set, foresee situations and face problems that may arise despite the fact that everything is perfectly calculated.
  • Cash Flow Statement Applications. It is considered that one of the main applications that is given to the EFE is aimed at guaranteeing the money of the shareholders to, in this way, give the information on how the income and expenses of money move. The EFE allows the company to guarantee stable and permanent liquidity so that the company can properly develop its management.

It should be noted that a correct application of the EFE and an optimal handling of the information it provides allows guaranteeing solidity, competitiveness and reliability to the various users of the company’s information, as well as giving stability to the country’s economic system.

  • Control of cash flow.- A company seeks profits and profitability, but it must guarantee to its shareholders and customers the investment it makes and the trust it places. That is why if the company does not have a permanent and efficient control of its inflows and outflows of money (Cash, cash) and its investments in general, it will simply live a slow agony and finally it will become extinct. If, on the contrary, they care and ensure their objectives and goals are achieved, they are assuring their survival, profitability to their clients and stability to the business system and the country’s economy.

The information provided by the EFE is not used by accounting professionals or by the various users of the country’s banking companies, nor by the regulatory, regulatory and control bodies of the national banking system.

The EFE is useful for the various users in presenting information not contained in other financial statements and classifying the flows by activity or types of transaction in the circumstances of the current economic environment (economic instability), at which time users of this and other Financial statements demand more comprehensive and clear information on the generation and application of resources (cash and equivalent) by area and by sectors. The EFE is a timely tool to more objectively assess the liquidity or solvency of banking companies.

For these reasons, it is considered that the EFE should adequately satisfy the information needs of the users and become a tool that fulfills the aforementioned purposes. Furthermore, the EFE constitutes a valid instrument in decision-making and in the evaluation of new investment and financing projects, since being temporary flows of a financial nature, the status of the source and use of cash and cash equivalents plays an important role. effective especially in these days, characterized by the globalization process.

These are the background and current regulations that regulate the preparation and presentation of the statement of cash flows in our country. However, it is convenient to highlight and briefly summarize three rules that coincide in content. They represent the coherence and standardization of accounting doctrine at the national and universal level.

Other States

Public Sector Financial Operational

Statement showing the financial operations of income, expenses and deficit of the dependencies and entities of the Federal Public Sector deducted from the compensated operations carried out between them. The difference between total income and expenses generates the economic deficit or surplus.


Balance that results from comparing the income and expenses of the Federal Government plus those of the parastatal entities of direct budgetary control.

Primary of the Public Sector

The primary balance is equal to the difference between the total income of the Public Sector and its total expenses, excluding interest. Because most of the interest payment for a fiscal year is determined by the accumulation of debt from previous years, the primary balance measures the effort made in the current period to adjust public finances.

State of Operations

Budgetary are those commitments of payment of the dependencies charged to the Budget of Expenditures of the Federation in favor of third parties, for amounts withheld derived from contractual and legal relationships, such as taxes, fees, premiums and contributions to which the payment of remunerations in favor of the following beneficiaries: Institute of Security and Social Services of State Workers, Institute of Social Security for the Mexican Armed Forces, National Bank of the Army, Air Force and Navy, SNC, Guarantee Fund for Refunds to the Federal Treasury , Aseguradora Hidalgo, SA, Capitalizable Savings Fund, Alimony, Union Dues and other similar concepts. These are some divisions of the statement of operations.

Compensated Operations

They are those that constitute a corresponding income with an expense for the same amount, establishing a compensatory relationship.

Open Market Operations

They consist of the purchase and sale of securities by Banco de México to directly influence the liquidity of the system. They are the measures with which the central bank controls the monetary system by buying and selling securities, mainly government bonds to commercial banks and the public. These operations are carried out to influence the level of liquidity and structure of interest rates in the financial markets.

Virtual Operations

They are those operations that do not constitute a monetary transfer of resources, that is, income operations that are offset by expenses, constituting purely accounting entries.


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