The financial analysis of a company is one that seeks to obtain solutions and relationships, to facilitate the decision-making of a company, different techniques are used to carry out this purpose such as, get ideas about the existence and availability of resources so that these are reversed. It works to give us an idea about the financial situation that a company has in the future, as well as its results. We can use it to determine problems within it.
It is a group of tools and methods that facilitate us to analyze financial statements , to know what the economic reality is and how we expect its positive transformation in the future. An accounting forecast should be taken into account , to take everything more calmly. If a good analysis is not carried out, the company may be left without capital , that is, bankrupt.
The analysis of a company is carried out by its administration , as well as the analysis of profits to increase its effectiveness, we will also know with how many resources a company has. The analysis depends on an indispensable tool which is to analyze and study the accounting information, in order to make a diagnosis of the current situation and make a future rate.
Types of financial analysis of a company
It is recommended to verify what type of analysis we want according to its importance, these are the most important types of financial analysis:
According to its temporal importance:
- Vertical analysis: They are used to analyze the balance sheet.
- Horizontal analysis: It is one that expresses the transformation, evolution and performance of the company .
- Historical analysis: They are used to detect trends within the company.
According to the kind of information that is handled:
- Static analysis: Where the information talks about a certain or important date.
- Dynamic analysis: Where the information speaks of a given period of time.
- Combined analysis: Where the information speaks of a single date and a given period of time .
According to the frequency of its use:
- Traditional analysis: They are used much more frequently by financiers.
- Advanced analysis: They are mathematical techniques used that are used in high-level studies.
Objective of the financial analysis of a company
Its sole objective is to compare the rates of active and passive income of a company . You must study the financial variables of a business’s operations, assess liquidity to generate income, verify data consistency, make important credit decisions for the business, qualify business managers through evaluations.
In general, the objectives are focused on results , operations, reality, liquidity and profitability of the financial situation of a company, in order to determine its current state and predict how it will be in a viable future. Therefore, the objectives vary according to the decision-making process, the quality of data and financial information that serve as the basis for this.
With financial analysis you can get to know a company better and can take all its qualities in depth, it is useful for investors and shareholders, since they have profit sharing benefits .
Importance of financial analysis of a company
Financial analysis opens options to those who invest, undertake and those who are already part of the company . Serving as a fundamental tool when opening a well-defined business, they can manage internal and external strategies in the financial field. It is of vital importance for large companies, since it is based on quantum elements that give importance to a company.
Its importance varies according to the business that is going to be carried out , most of the time it is used in loans. Facilitates decision making when third parties are interested in the economic enterprise. It is extremely important to instruct the accountant to perform a full analysis, as accounting and financial problems can arise .
Financial analysis is thought to be a method, applied to any company that allows you to evaluate your financial situation allowing you to know what condition it is in and observe the change in the organization. It is also important to note that the most important process in a business is decision-making, which requires knowing the information to determine which is the most appropriate way to act.
