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Goals and objectives of financial analysis

Get a technical base for financial analysis of any aspect of companies’ activities on the “Financial Analyst” course

The financial analysis of an enterprise can be of several types: internal and external. Internal analysis involves deep immersion in the company’s processes, identifying the advantages and disadvantages of the business, operational indicators of a deep nature, often not contained in public reports. It is conducted by the employees of the company. External analysis is designed to assess the riskiness of investments in an enterprise, the investment attractiveness of a company, and competitiveness. The report, as a rule, is formed from public data and is more superficial, carried out by external analysts, consultants, investors, the Federal Tax Service, the media, etc.

We wrote about external, fundamental analysis in the article.

The objectives of internal financial analysis are as follows:
– determination of the financial stability of the enterprise;
– identification of key drivers of business growth, the most marginal products or services, as well as finding weaknesses;
– building a strategic vision based on financial results;
– determination of the main reasons for the growth or fall of financial indicators.

External persons are interested in:
– to determine the financial attractiveness of the project / enterprise;
– assess the financial stability of the enterprise and risks;
– assess the profitability, profitability of the business and the potential for its development by predicting financial indicators.

In general, financial analysis includes:
– analysis of the financial results of the enterprise;
– analysis of the financial condition of the enterprise;
– analysis of the effectiveness of the financial and economic activities of the enterprise.

Among the main methods of analysis are:
– horizontal or temporal analysis, which involves the assessment of each line of the reporting in comparison with the previous period;
– vertical or structural analysis focuses on the analysis of the bottom line, by evaluating each reporting indicator that makes up the bottom line;
– trend analysis involves the focus of assessing the trend of certain indicators, dynamics;
– analysis of financial ratios involves assessing the financial condition through multipliers or ratios;
– comparative or spatial analysis is carried out both by investment analysts of external companies, we mentioned it in the article, and within the company, the analysis involves comparing individual on-farm reporting indicators, indicators of subsidiaries, divisions, etc. and comparing information with indicators of analogous companies and average market values.

We will talk about each type of analysis in separate articles.

In the video, Alexander Valtsev, CEO of SF Education, and Maxim Ulyanov, director of the rating agency Akra, spoke about the problems of financial analysis, including using the example of the VIM AVIA case.

Get a technical base for financial analysis of any aspect of a company’s activities on the “Financial Analyst” course

Moris Akline
About author

Speculative operations in the foreign exchange and stock market. Work with futures and indices on CME. Work on FORTS and RTS. Development of portfolios and investment strategies for clients. Knowledge of technical (price charts of various types, indicators and oscillators, trends, channels, support / resistance levels) and fundamental analysis, take note of news. I work according to my trading strategy in compliance with the rules of capital management and risk management. Development of trust management strategies. Technique of order execution, placing and changing protective stop-losses, hedging.
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