Financial analysis of an enterprise: what the general director needs to know. Why and who needs financial analysis

In this article we will talk about what a financial analysis of an enterprise is and what should be taken into account when conducting it.

You will learn:

• What are the goals of financial analysis of an enterprise?
• What methods are used to conduct financial analysis of an enterprise?
• How is the analysis carried out? financial condition enterprises using coefficients.
• In what order is the analysis of the financial activities of an enterprise carried out?

Objectives of financial analysis of an enterprise

• Study economic processes and understand how they are related to each other.
• Scientifically substantiate plans, make correct management decisions and objectively evaluate the results of their achievement.
• Identify positive and negative factors affecting the functioning of the enterprise.
• Reveal the trends and proportions of the company's development, identify unused reserves and economic resources.
• Summarize best practices and develop proposals for the implementation of effective solutions in the activities of a particular organization.

Financial analysis of the enterprise will not necessarily identify the factor that could cause a business to fail. However, only an analysis of the financial stability of the enterprise will help to understand why things began to get worse. The results will allow us to identify the most vulnerable areas in the company’s economy, outline effective ways to solve problems and overcome the crisis.

The main goal of the financial analysis of an enterprise is to assess internal problems, as well as develop, justify and make decisions on business rehabilitation based on the results obtained, exit to bankruptcy, acquisition or sale of a company/shareholding, raising borrowed funds (investments).

Additional tasks that analysis will help solve

• Assess the implementation of the plan for the receipt of financial resources and their distribution from the perspective of improving the financial position of the company. The assessment is carried out on the basis of studying the relationship between the financial, production and commercial performance of the company.
• Predict economic profitability and financial results, taking into account the real situation of the enterprise, the availability of borrowed and own funds and developed models of financial condition (subject to the existence of different options for using resources).
• Develop certain activities carried out with the aim of more efficient use of monetary assets and strengthening the financial position of the organization.

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Main sources of financial analysis of an enterprise

Basically, data for financial analysis is taken from sources such as:

• balance sheet (form No. 1). This is a form of accounting reporting that reflects the state of a company's economic assets and their sources in a financial assessment as of a certain date. The balance sheet includes two components - assets and liabilities, and their totals must be equal;
• financial performance report (form No. 2);
• cash flow statement (form No. 4);
• other forms of reporting, primary and analytical accounting data, deciphering and detailing individual balance sheet items.

Financial statements represents unified system indicators, looking at which experts understand what kind of property and financial condition the enterprise is in, what results it managed to achieve. The basis for the preparation of financial statements is accounting data based on the results of the reporting period and as of the reporting date in the established forms. The composition, content, requirements and other methodological foundations of accounting statements are stated in the accounting regulations “Accounting statements of an organization” (PBU 1 - PBU 10), approved by the Ministry of Finance of the Russian Federation with subsequent amendments. In accordance with this provision, financial statements must include interrelated balance sheet data that forms a single whole, a profit and loss statement, as well as explanations thereto.

The balance sheet consists of 6 sections, these are:

1. fixed assets;
2. current assets;
3. losses;
4. capital and reserves;
5. long-term liabilities;
6. short-term liabilities.

Assets are balance sheet items that reflect the composition and placement of the company's economic assets (fixed and working capital) as of a certain date.

Liabilities are balance sheet items that characterize the sources of formation of economic assets, that is, obligations to the state, shareholders, suppliers, banking institutions, etc.

The names of individual chapters and articles in the balance sheet correspond to the classification of the organization’s economic assets and their sources according to economic characteristics. Information about numerous classification groups is detailed and made more analytical. The aggregated indicator of the financial statements is followed by its disaggregation through the transfer of “including”. This makes balance sheet information more meaningful and understandable to a wide range of users, even those who know little about the scheme for generating this data.

Investors and analysts pay attention Special attention to form No. 2, since it includes dynamic information about the company’s significant successes and allows you to understand thanks to what aggregated factors and on what scale the enterprise operates. Based on the data from Form No. 2, it is possible to assess the financial condition of the company both in terms of total volume in dynamics and in structure, as well as conduct factor analysis profits and profitability.

As for traditional financial indicators generated in the accounting system and reflected in the accounting (financial) statements, problematic aspects of their use are associated with a number of specific restrictions:

• the value of financial indicators can be measured using accounting methods, methods of asset valuation, and the application of the norms of the Tax Code of the Russian Federation for accounting purposes, which is especially common in accounting practice in the Russian Federation. This distorts the amount of expenses, profits and indicators derived from them;
• based on financial indicators, one can judge past events and actual facts of economic activity;
• financial indicators are distorted by inflation, they are easy to disguise and falsify;
• financial indicators that are reflected in the accounting (financial) statements and the ratios derived from them are too general, and therefore it is not possible to use them at all levels of enterprise management;
• Based on accounting (financial) statements as an information source for calculating relative financial indicators, it is impossible to fully judge the value of assets. Reporting does not include information about all income-generating factors associated with intellectual capital;
• It is difficult to evaluate long-term management decisions based on profit as an accounting performance indicator.

If an analysis of the financial results of an enterprise is carried out based only on accounting and reporting data, it may be unreliable, since these data are not operational.

Indicators of the company's financial position are formed primarily on the basis of management accounting data, or internal document flow. But at the same time, a number of confidential restrictions appear, and the information that is the basis for the analysis, as well as its results, turns into trade secret, and outside stakeholders cannot directly obtain them.

Analysis of the financial results of an enterprise based on management accounting indicators has a visible advantage. This is the degree of its spatial and temporal detail, initially formed taking into account the requirements and wishes of the enterprise regarding the direction of segmentation and frequency of measurements (hour, day, week, month, and so on). At the moment, the most appropriate period of analysis is 1 month. In this case, the information remains relevant and is sufficient to determine trends in changes in the economic situation of the company.

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Operational aspects of the analysis of the company’s financial activities are expressed in monitoring the state of receivables and payables, justifying the most optimal forms of settlements with counterparties, maintaining the balance of funds required for daily payments, analyzing the turnover of individual elements of working capital, tracking indicators of the operating and financial cycles, analyzing financial budgets and evaluation of their implementation. These tasks are solved in the course of current financial activities, thanks to which the company controls the implementation of management decisions, maintains its economic position at a decent level and remains solvent.

Strategic aspects of the financial activity of an enterprise relate primarily to the application of the methodology of financial analysis in the development and justification of its growth strategy. As you know, a business cannot develop if investment programs are not implemented, there is no financial support for them, there is no proper return on investment and the company is financially unstable. Strategic aspects of financial analysis of an enterprise also include the rationale for dividend policy and distribution of after-tax profits. At the moment, strategic issues of financial analysis are becoming increasingly important, since the concept of managing the value of a company and the need to analyze strategic risks are being introduced into administrative practice.

Among other things, decisions on the financial management of an enterprise are made on the basis of studying external conditions work, assessment of its position in the capital market, external analysis of the financial condition and business activity of existing and potential counterparties from the standpoint of the rationality of establishing and further management business communication and interaction with them.

The most common methods of financial analysis of an enterprise

There are 6 types of financial analysis of an enterprise, these are:

1. horizontal (temporary), within which each reporting item is compared with the previous period;
2. vertical (structural) when they reveal specific gravity individual articles in the final indicator, taken as 100%;
3. trend, during which each reporting item is compared with previous periods and the main trend in the dynamics of the indicator is identified, cleared of random influences and individual characteristics preceding individual periods. Using the trend, specialists formulate probable values ​​of indicators in the future, accordingly, conduct long-term forecast analysis;
4. analysis of relative indicators(coefficients). Here the relationships between individual reporting items are calculated and how they relate to each other is determined;
5. comparative (spatial) analysis. In this case, the reporting indicators of subsidiaries and structural divisions are analyzed, as well as data from competitors and industry averages, etc.;
6. factorial, in which they analyze how individual factors (reasons) influence the resulting indicator. In this case, a distinction is made between direct factor analysis (direct analysis), which involves splitting the resulting value into a number of components, and reverse factor analysis (synthesis), when individual parts are combined into a single indicator.

Let us consider the types of financial analysis of enterprises in more detail.

1. Vertical, or structural, analysis of the financial and economic activities of an enterprise involves determining the structure of the final financial indicators (the amounts for individual items are taken as a percentage of the balance sheet currency) and identifying the impact of each of them on the outcome of the activity. When moving to relative indicators, it is possible to perform inter-farm comparisons of the economic potential and performance of companies using resources of different sizes, as well as smooth bad influence inflation, due to which absolute reporting indicators are distorted.
2. The basis of horizontal analysis is the study of the dynamics of individual financial indicators over time. IN in this case identify which sections and items of the balance sheet have changed.
3. The basis of the analysis of financial ratios is the calculation of the ratio of different absolute indicators of the company’s financial activities. Information is taken from the company's financial statements.

TO the most important indicators financial activities of the enterprise include the following groups:

• liquidity;
• financial stability and solvency;
• profitability;
• turnover (business activity);
• market activity.

When analyzing financial ratios, remember a number of important points:

• the size of financial ratios largely depends on the accounting policies of the company;
• due to diversification of activities comparative analysis coefficients by industry become more complicated, since standard values ​​can vary greatly for different areas of the company’s work;
• the standard coefficients on the basis of which the comparison is made may not be optimal and may not correspond to the short-term objectives of the period under study.

1. In comparative financial analysis, the values ​​of individual groups of similar indicators are compared, namely:

• company performance and industry averages;
• the company’s indicators and these values ​​among its competitors;
• performance of the company as a whole and its individual divisions;
• reporting and planning indicators.

1. Thanks to integral (factorial) financial analysis, it is possible to more deeply assess the financial position of a company at a given moment.

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The practitioner tells

Analysis of the financial condition of the enterprise by responsibility centers

Andrey Krivenko,

ex-financial director of Agama Group of Companies, Moscow

Our company is a distributor of deep-frozen products. To manage sales volume in this area, the first step is to adjust the timing of accounts receivable and negotiate discounts with customers. That is why managing the financial condition of a company is extremely necessary.

Analysis of the financial and economic activities of an enterprise is carried out when budgets are formed, reasons for deviations of current indicators from planned ones are identified, plans are adjusted, and individual projects are calculated. The main tools here are horizontal (tracking changes in indicators over time) and vertical ( structural analysis articles) analysis of management accounting reporting documentation. It is also necessary to calculate the coefficients. Such financial analysis is carried out for all main budgets: BDDS, BDR, balance sheet, sales budgets, purchases, inventory.

Horizontal financial analysis of the enterprise is carried out every month by item in the context of responsibility centers (CO). At the first stage, the share of certain expense items in the total cost of the central heating center is calculated and the compliance of this share with current standards. Variable expenses are then compared to sales volume. Then the values ​​of the two indicators are compared with their values ​​in previous periods.

The annual expansion of business is approximately 40–50%, and there is no point in analyzing data from two and three years ago, and therefore, as a rule, they evaluate information for a maximum of Last year, given the growth of the enterprise. At the same time, they check how the actual values ​​of the monthly budget correspond to the planned annual ones.

Analysis of the financial condition of an enterprise using ratios

The main indicators on the basis of which one can judge the financial condition of a company are solvency and liquidity ratios. That is why analysis of the financial performance of this type of enterprise is very important.

It should be noted that solvency is a broader concept compared to liquidity. Solvency is the ability of an enterprise to fully fulfill its payment obligations, the presence of financial resources in the necessary and sufficient amount. As for liquidity, we are talking about the ease of implementation, sales, and conversion of property into money.

The solvency and liquidity of an enterprise are determined mainly on the basis of ratio analysis. First, let's understand what a financial ratio is.

A financial ratio is a relative indicator that is calculated as the ratio of individual balance sheet items and their combinations. Ratio analysis is carried out on the basis of the balance sheet, that is, according to Forms 1 and 2.

In the economic literature, financial ratio analysis is the study and analysis of the financial statements of an enterprise using a set of financial indicators (ratios) that characterize the position of the business. This type of research is carried out to describe the activities of a business entity according to some basic indicators that allow assessing its financial condition.

1. Ratios on the basis of which one can judge the solvency of a company.

		Calculation formula
		Numerator	Denominator
Financial Independence Ratio		Equity	Balance currency
Financial dependency ratio		Balance currency	Equity
Debt capital concentration ratio		Borrowed capital	Balance currency
Debt ratio		Borrowed capital	Equity
Total Solvency Ratio		Balance currency	Borrowed capital
Investment ratio (option 1)		Equity	Fixed assets
Investment ratio (option 2)		Own capital + long-term liabilities	Fixed assets

1. Ratios reflecting the company's liquidity.

Name of financial ratio		Calculation formula
		Numerator	Denominator
Instant liquidity ratio			Short-term liabilities
Absolute liquidity ratio		Cash and cash equivalents + short-term financial investments (excluding cash equivalents)	Short-term liabilities
Quick ratio (simplified version)		Cash and cash equivalents + short-term financial investments (excluding cash equivalents) + accounts receivable	Short-term liabilities
Average liquidity ratio		Cash and cash equivalents + short-term investments (excluding cash equivalents) + accounts receivable + inventories	Short-term liabilities
Intermediate liquidity ratio		Cash and cash equivalents + short-term financial investments (excluding cash equivalents) + accounts receivable + inventories + value added tax on purchased assets	Short-term liabilities
Current ratio		Current assets	Short-term liabilities

A financial analysis of the solvency of an enterprise, as well as its liquidity, is needed first of all in order to understand what the business’s risk of becoming bankrupt is. It should be noted that liquidity ratios do not relate in any way to assessing the growth potential of an enterprise, but rather demonstrate its position at a given point in time. If an organization works for the future, liquidity ratios cease to be so significant. Therefore, the financial condition of an enterprise should be assessed by first analyzing its solvency.

1. Ratios that allow one to judge the company’s financial position.

Name of financial ratio	Calculation formula
	Numerator	Denominator
Property dynamics	Balance sheet currency at the end of the period	Balance sheet currency at the beginning of the period
Share out current assets in property	Fixed assets	Balance currency
Share of current assets in property	Current assets	Balance currency
Share of cash and cash equivalents in current assets	Cash and cash equivalents	Current assets
Share of financial investments (excluding cash equivalents) in current assets	Financial investments (excluding cash equivalents)	Current assets
Share of inventories in current assets		Current assets
Share of accounts receivable in current assets	Accounts receivable	Current assets
Share of fixed assets in non-current assets	Fixed assets	Fixed assets
Share of intangible assets in non-current assets	Intangible assets	Fixed assets
Share of financial investments in non-current assets	Financial investments	Fixed assets
Share of research and development results in non-current assets	Research and development results	Fixed assets
Share of intangible exploration assets in non-current assets	Intangible search assets	Fixed assets
Share of tangible exploration assets in non-current assets	Material prospecting assets	Fixed assets
Share of long-term investments in tangible assets in non-current assets	Long-term investments in material assets	Fixed assets
Share of deferred tax assets in non-current assets	Deferred tax assets	Fixed assets

1. Ratios demonstrating the financial stability of a business.

The basis of the main coefficients used in assessing the financial stability of a company is the following quantities taken into account for analysis purposes: equity capital (SC), short-term liabilities (CL), borrowed capital (LC), own working capital (WCC). These indicators are calculated using formulas based on the balance sheet line codes:

• SK = K&R + DBP = page 1300 + page 1530
• KO = page 1500 - page 1530
• ZK = DO + KO = page 1400 + page 1500 - page 1530
• SOK = SK - VA = page 1300 + page 1530 - page 1100

K&R here – capital and reserves (p. 1300); DBP – deferred income (line 1530); DO – long-term liabilities (p. 1400); VA - non-current assets (line 1100).

When analyzing the financial performance of an enterprise, you need to remember that the standard and recommended values ​​were derived from the results of an analysis of the work of companies in the West. They were not adapted to Russian realities.

You should also be careful when comparing ratios with industry standards. If in developed countries the proportions were formed many years ago and all changes are continuously monitored, then in the Russian Federation the market structure of assets and liabilities is just being formed and there is no full monitoring. And if we take into account distortions in reporting and continuous changes in the rules for its development, then it is quite difficult to derive reasonable new industry standards.

Next, they compare the values ​​of the indicators with the recommended standards and ultimately evaluate whether the company is solvent, profitable, whether it is financially stable, and at what level its business activity is.

The practitioner tells

Proper planning is the key to avoiding financial shortages

Alexandra Novikova,

Deputy Head of Financial Service at SKB Kontur, Yekaterinburg

Most enterprises often face the problem of a shortage of working capital. As a result, they have to use loans (credits). Lack of finance is a consequence of incorrect planning of receipts and payments of money.

Our organization, in order to prevent this kind of situation, applies budgeting in relation to the movement of financial resources. The largest percentage of all payments for a specific period falls on settlements with suppliers and agents. In this regard, even at the planning stage, we compare these expenses with the receipt of funds from clients and see the likely surplus or deficit of the latter. By varying the timing of dividend payments to owners, we manage to achieve the optimal ratio between free cash and loan debt.

Conducting a financial analysis of an enterprise: 6 stages

Stage 1. Formation of the purpose and context of analysis

Understanding your goals is especially important if you are going to conduct an analysis of the financial performance of a business, since there are many ways to do it, and the study uses a significant amount of data.

Some analytical tasks are precisely defined, and here you can do without the participation of an analyst. For example, a periodic assessment of an investment-debt portfolio or a report on the stock markets of a particular enterprise can be carried out on the basis of the provisions of institutional norms, that is, the requirements contain regulations, for example, Guidelines for analyzing the financial condition of organizations. We also note that the format, procedures and/or information sources may also be offered by domestic official documents legal and regulatory nature.

If other tasks are set for the financial analysis of an enterprise, the participation of an analyst is necessary to determine the main meaning of such a study. Based on the purpose of the financial analysis of the enterprise, experts find out which approaches are best to use, which tools and information sources to use, in which format to present the results of the work and which aspects to pay the most close attention to.

If there is a large amount of information to deal with, an inexperienced analyst may simply start crunching numbers and creating output. But this approach is not the most effective, and it is better to exclude it so as not to obtain uninformative information. Consider the questions: What conclusion would you come to given a significant amount of data? What questions could you not answer? Which solution will your answer support?

The analyst should also determine the context at this stage. Who is the target audience? What is the final product, for example, a final report with conclusions and recommendations? What period was chosen (what time period was taken for the financial analysis of the enterprise)? What resources and resource constraints apply to the research? And in this case, the context can also be determined in advance (that is, the analysis can be carried out in a standard format that is established by institutional norms).

After identifying the purpose and context of the company’s financial analysis, the expert needs to formulate specific questions that he can answer in the process. For example, if an analysis (or some part of a larger study) is carried out to compare the historical performance of three enterprises operating in the same field, the questions will be: what was the relative growth rate of the enterprises and what was their relative profitability; Which organization demonstrates the best financial results, and which performs less efficiently than others?

Stage 2. Data collection

At this stage, the analyst collects information on the basis of which he can answer certain questions. Here it is very important to understand the specifics of the enterprise, to know the financial indicators and financial condition (including trends over a long period of time in comparison with similar companies). In some cases, it is possible to conduct a historical analysis of the financial and economic activities of an enterprise based only on financial indicators. For example, they will be sufficient to sort through a large number of alternative enterprises with a certain minimum degree of profitability. But in order to solve deeper questions, for example, to understand due to what circumstances and in what way one enterprise acted weaker than its competitors, additional information is needed.

It should also be noted that if you need to compare the historical performance of two companies in a particular industry, you can rely solely on historical financial statements. They will allow you to understand which company’s growth rate was faster and which company is more profitable to invest in. However, if we are talking about a broader comparison with overall industry growth and profitability, it is obvious that industry data will have to be used.

Economic and industrial data are also needed to better understand the environment in which a company operates. Specialists often use a top-down approach, in which they, firstly, see the macroeconomic situation, the preconditions for economic growth and inflation, secondly, analyze development trends in the industry in which the company operates, and thirdly, outline the organization’s prospects in its industry and global economic structure. For example, an analyst may need to forecast expected profit growth for a business.

To determine the level of development of a company in the future, the historical data of the subject is not enough - they represent only one information component. However, if an analyst understands economic and industry conditions, he may well be able to create a more detailed forecast of future business earnings.

Stage 3. Data processing

Once the necessary financial statements and other information are obtained, the analyst should evaluate this information using appropriate analytical tools. For example, in the process of data processing, you can calculate coefficients or growth rates, prepare horizontal and vertical financial analysis of the enterprise, generate charts, conduct statistical calculations, for example, using regression or Monte Carlo methods, estimate equity participation, sensitivity, apply other analysis tools, or combine several of them that correspond to the goals of the work.

As part of a comprehensive financial analysis at this stage you need to:

• review and evaluate the financial statements of each company that needs to be analyzed. At this stage, they study the accounting of the organization, analyze the methods used (for example, when generating information about income in the statement of financial results), operational decisions made, factors influencing financial statements;
• make necessary adjustments to the financial statements to facilitate comparison; unadjusted reports of the studied enterprises differ in accounting standards, operating decisions, etc.;
• prepare or collect data for financial statements and financial ratios (which demonstrate various aspects of corporate performance, and the basis for their determination are the elements of the enterprise’s financial statements). Through horizontal-vertical financial analysis and financial performance, analysts are able to examine relative profits, liquidity, leverage, efficiency, and evaluate a business in comparison to past performance and/or the performance of competitors.

Stage 4. Analysis/interpretation of processed data

After data processing, the output information is interpreted. It is rarely possible to answer a clear financial analysis question in the format of a single number. The basis of the answer to the analytical question is the interpretation of the results of calculation of indicators. This is the answer that is used to form conclusions and make recommendations. The purpose of financial analysis of a company is often to obtain an answer to a specific question, but usually the expert must provide an opinion or recommendation.

For example, the analysis of securities may have a logical conclusion in the form of a decision on the acquisition, retention, sale of shares or a conclusion on the price of a share. To substantiate his conclusions, the expert can provide relevant information in the form of the target value of the indicator, relative or expected performance in the future, subject to maintaining the strategic position occupied by the enterprise at the moment, the quality of management and any other information important when making a decision.

Stage 5. Developing and presenting conclusions and recommendations (accompanied by, for example, an analytical report)

In this case, the analyst draws up a conclusion or recommendations in the format chosen by the company. The way in which results are presented will be influenced by the analytical task, institution, or audience.

The investment analyst's report may contain the following information:

• results and investment conclusion;
• business resume;
• risks;
• grade;
• historical and other information.

The completion of financial statements may be regulated by relevant authorities or professional standards.

Step 6: Taking further action

Generating a report is not the final stage. When investing in stocks or assigning a credit rating, the subject of the analysis should be re-examined from time to time to determine whether the original conclusions and recommendations are still valid.

If there is no investment in shares, further monitoring is not required. But at the same time, it is in any case useful to determine how effectively the analysis of the financial and economic activities of the enterprise was carried out (for example, if the rejected investment is effective and attractive). Further actions in the analysis process may be a repetition of the previously presented measures.

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The best books about financial analysis of an enterprise

1. L. A. Bernstein"Analysisfinancialreporting» - Financial Statement Analysis. Theory, Application, and Interpretation.

The manual is extremely useful for financial directors and accountants who want to better understand how to conduct financial analysis of an enterprise and learn about recommendations for making decisions.

1. Svetlana Kamysovskaya, Tatyana Zakharova “Accounting financial statements. Formation and analysis of indicators. Tutorial».

The book describes the latest methodology for analyzing the financial condition of an enterprise and the most popular methods for conducting it. The authors also talk about the procedure for generating accounting reports.

1. Glafira Savitskaya “Analysis of the economic activity of an enterprise.”

A useful guide, written in a simple and accessible language. Allows you to better understand what financial and ratio analysis of accounting reports is.

1. Benjamin Graham and Spencer B. Meredith, “Analysis of Corporate Financial Statements.”

Information about the experts

Andrey Krivenko, ex-financial director of Agama Group of Companies (Moscow). Andrey Krivenko is the founder of the Izbenka and VkusVill food chains. From 2002 to 2004, he served as head of strategic projects at the Regent holding. From 2004 to 2008 he worked as financial director at the Agama fishing holding.

Alexandra Novikova, Deputy Head of the Financial Service of the SKB Kontur company, Yekaterinburg. SKB Kontur is a leading developer of online services for accounting and business. SAAS products from SKB Kontur are chosen by thousands of enterprises throughout Russia for reporting, exchange electronic documents and accounting.

General characteristics of financial analysis

Analysts work in a number of functional areas. Typically, analysts evaluate an investment in some type of security that has the characteristics equity(representing an ownership interest) or debt(representing the lending position). Upon acceptance investment decisions or substantiation of recommendations, analysts must evaluate the performance, financial condition and value of the company issuing the securities.

Company financial data, which includes financial reports and other data, provide information necessary to evaluate a company and its securities. Therefore, the analyst must have a solid understanding of the information presented in each company's financial statements, including financial notes and other forms of supplementary information.

The essence of financial analysis of an enterprise

Role The purpose of financial statements of companies is to provide information about their activities, financial position and changes in financial position that will be useful to a wide range of users in making economic decisions. Role Financial statement analysis is the use of financial statements prepared by companies, in combination with other information, to evaluate the past, current, and future performance and financial position of a company to inform investment, lending, and other economic decisions.

When evaluating financial statements, analysts typically justify an economic decision. Examples of such solutions include the following:

• Grade investment efficiency into equity capital for inclusion in the investment portfolio.
• Grade mergers or acquisitions candidate enterprise.
• Grade subsidiary company or an operating division of the parent company.
• Deciding to make a venture capital investment or other type of private capital investment.
• Definition creditworthiness the company that made the loan request.
• Extending credit to the client.
• Expertise compliance with loan agreements or other contractual agreements.
• Assignment rating a company's debt or bond issue.
• Evaluating a Security for Acceptance investment recommendations other market participants.
• Forecasting future net income and cash flows.

In general, analysts look to study a company's performance and financial position, as well as forecast future performance and financial strength. They are also interested in factors that influence the future activities of the company.

Research into a company's performance may include an assessment profitability company (the opportunity to make a profit from the sale of goods and services) and valuation its cash flow capacity generate profits (the ability to produce cash receipts higher than cash disbursements). Profit and cash flow are not equivalent. Profit represents the price of certain goods or services that exceeds the cost of providing those goods and services (regardless of when the money is received or paid).

While profitability is important, a company's performance is also affected by its ability to generate positive cash flow. Cash flow is important because, ultimately, cash is needed to pay employees, suppliers, and other participants so that the business can continue to operate for the foreseeable future.

A company that generates positive cash flow from operational activities, has greater flexibility in financing the necessary investments and can take advantage of attractive business opportunities, compared with a comparable company without a positive cash flow. In addition, cash flow is a source returns supplier capital.

Thus, the expected value of future cash flows is important in valuing corporate securities and in determining a company's ability to meet its obligations. The ability to meet short-term obligations is generally referred to as liquidity and the ability to meet long-term obligations are usually called solvency or financial stability.

As noted earlier, profit reflects a company's ability to provide goods and services at prices above the cost of providing the goods and services. Profit also represents useful information about future (and past) cash flows. Many analysts not only estimate past profitability, but also forecast future profitability.

Analysts are also interested in the company's current financial position. Financial position can be measured by comparing the resources controlled by a company in relation to the claims (obligations) on those resources. An example of such a resource would be cash. This money can be used by the company to pay a liability to the supplier (a claim against the company) and can also be used to make payments to the owner (who also has a claim against the company due to the profits that were earned). Financial situation is especially important in credit analysis.

When conducting a financial analysis of a company, the analyst will regularly refer to the company's financial statements, financial notes and release schedules, and a number of other sources of information.

To conduct a financial analysis of an enterprise, you can use programs that allow you to automatically calculate financial indicators, generate tables, charts, graphs and text outputs. An example of this programs is an online financial analysis program.

Key sources for financial analysis

To conduct a financial or credit analysis of a company, the analyst must collect a large amount of information. The nature of the information will vary depending on the individual task, but will typically include information about the economy, industry and company, as well as information about comparable peer companies.

Most of this information will come from outside the company, for example, this includes economic statistics, industry reports, professional publications and databases containing information about competitors. The company itself provides some of the basic pieces of information for analysis in its financial reports, press releases, as well as in mass media and webcasts.

Companies prepare financial statements and present them to investors and creditors to demonstrate financial performance and financial strength at regular intervals (annually, semi-annually, and/or quarterly). Company financial data includes financial reports And Additional information necessary to assess the performance and financial position of the company.

Financial statements are end results accounting entry is a process that records the business activities of a company. They summarize this information for use by investors, creditors, analysts and others interested in the company's performance and financial condition. In order to provide some guarantees For the information presented in the financial statements and related notes and notes, the financial statements are audited by independent auditors who express an opinion on whether the financial statements sufficiently present the company's results of operations and its financial position.

Financial statements and additional information

The main financial statements that are the subject of analysis are (profit and loss), balance sheet, cash flow statement and statement of changes in equity. Income statement And cash flow statement reflect various aspects of a company's activities over a certain period of time.

Balance displays the financial position of the company at a given time. Statement of changes in equity provides additional information regarding changes in the company's financial position. IN supplement to financial statements, the company may provide other information that is useful to the financial analyst. As part of his analysis, the financial analyst should read and evaluate this additional information, which includes:

• explanations to financial statements;
• information (word) from management companies;
• external report auditor.

Rice. 1 Sources of financial information

Income statement

An income statement provides information about a company's financial performance over a specified period of time. The income statement reports how much revenue a company generated during a period and what expenses it incurred in connection with the operations that generated the income. Net income (revenue minus all costs) on the income statement is often referred to as the "bottom line" because of its proximity to the bottom of the income statement.

Income statements are presented on a consolidated basis, meaning that they include income and expenses subsidiaries under the control of the parent company. The income statement is sometimes referred to as the statement of activities or profit and loss. The basic equation underlying the income statement is:

Income - expenses = net profit (total financial result of the period)

Information about profit and loss represents the most recent year in the first column and the most early year in the last column. Even though this general idea, analysts should be careful when reading earnings information as there are times when years may be listed from the base year to the latest year.

Companies will present their basic and diluted earnings per share at the bottom of the income statement. Earnings per share are net income divided by the number of shares outstanding during the period. Basic earnings per share uses the weighted average number of common shares that were actually outstanding during the period, while diluted earnings per share uses diluted shares - the number of shares that would have been outstanding if potential claims on common shares (for example, stock options) were exercised by their holders.

In the process of analyzing the financial results statement, it is worth considering the dynamics of income and expenses and answering the following questions:

• Is the change in revenue due to a change in units sold, a change in prices, or some combination of these factors?
• Is your expense management process effective?
• How does the company perform compared to other companies in the industry?

In answering these questions, the analyst must collect, analyze, and interpret facts from a variety of sources, including profit and loss reports.

Company balance

Accounting balance(also known as a statement of financial position or statement of financial position) presents the current financial position of a company by disclosing the resources available and the sources of their financing, both equity and debt. Equity represents the excess of assets over liabilities.

This is the amount that belongs to the owners or shareholders of the business; It is the remaining interest in a business's assets after deducting its liabilities. The three parts of the balance sheet are related in an accounting relationship known as the accounting equation:

Assets = Liabilities + Capital owners (that is, the total amount of assets must be balanced by the same amount of liabilities and capital of the owners).

On the other hand, the three parts of the balance sheet equation can be formulated in terms of equity, that is:

Assets – Liabilities =Owners' capital

Using the balance sheet and applying financial statement analysis allows the analyst to answer questions such as:

• Does the company have sufficient liquidity (the ability to meet short-term obligations), has the company's condition improved?
• Is the company's sustainability sufficient (does it have enough reliable resources to cover its obligations)?
• What is the company's financial position in relation to the industry as a whole?

Cash flow statement

While the income statement and balance sheet provide a measure of a company's success in terms of performance and financial position, cash flow is also vital important aspect for the long-term success of the company. Disclosure of sources of financing and uses of cash helps creditors, investors, and other users of statements evaluate a company's liquidity, solvency, and financial flexibility.

Financial flexibility is the ability to respond and adapt to new financial risks and opportunities. Report cash flow report classifies all of the company's cash flows in operating, investing and financing activities. operating room activities include transactions that generate net income and are essentially activities that involve the day-to-day business functions of a company.

Investment activities are those activities that are associated with the acquisition and disposal of long-lived assets such as equipment. Financing is those activities that involve obtaining or repaying capital for use in a business.

In line " operating room operations” statement of cash flows, the company reconciles its net income with its net cash from operating activities. This highlights the difference between the income statement and the cash flow statement. Income is shown on the income statement when it is earned, which is not necessarily when cash is received.

The cash flow statement represents another aspect of a business's performance: the company's ability to generate cash flows from the operation of the business. Ideally, the analyst would like to see that the primary source of positive cash flow is flow from operating activities (rather than from investing or financing activities).

Statement of changes in equity

The income statement, balance sheet, and cash flow statement are the main financial statements used to evaluate a company's performance and financial position. A fourth financial statement is also available, variously called the "statement of changes in equity", "statement of changes in owners' equity", "statement of stockholders' equity" or "statement of retained earnings". This document primarily serves to report changes in the owners' investment in the business over time and helps the analyst understand changes in equity on the balance sheet.

Explanations to the balance sheet and income statement

Companies can also add notes to the balance sheet and income statement to their financial statements. As an example, financial notes may detail previous reporting forms and also provide explanatory information about the following:

• Business acquisitions
• Contingencies and obligations
• Judicial production
• Options for shares and other employee benefit plans
• Operations with related parties
• Significant customers
• Subsequent events
• Business and geographic segments
• Quarterly financial data

In addition, the notes may contain information about the methods and techniques used to prepare the financial statements. Comparability of financial statements is a critical requirement for objective financial analysis. A financial statement is comparable when information is measured and displayed in a similar manner. Comparability allows the analyst to identify and analyze the real differences between an economic entity and other companies.

The International Accounting Standards Board in London sets the standards according to which international financial reporting must be prepared. They are called International Financial Reporting Standards (IFRS). When comparing financial statements prepared under IFRS and a domestic company, the analyst must understand the differences in these standards, which may affect, for example, the period in which the income statement is prepared. In addition, certain principles require the use of estimates and assumptions in determining performance and financial condition.

This flexibility is necessary because, ideally, the company will select methods, estimates and assumptions within principles that fairly reflect the unique economic environment of the company's business and industry. Although this flexibility in accounting principles supposedly meets the different needs of many businesses, it creates problems for the analyst as comparability is lost.

For example, if a company purchases a piece of equipment for use in its business, accounting standards require that the cost of the asset be reported as an expense on a systematic basis over the life of the equipment (evaluating the life of the equipment). This distribution of cost is called depreciation.

The standards allow greater flexibility in determining how expense is determined in each period. Two companies may purchase similar equipment but use different methods and assumptions to record costs over time. Comparing the performance of these companies directly can lead to an incorrect conclusion about the financial performance of the companies.

An entity's accounting policies (methods, estimates and assumptions) are generally also presented in the notes to the financial statements. In a note containing summary Significant accounting policies show, for example, how the company recognizes its revenues and how capital assets are impaired. Analysts must be aware of the methods, estimates and assumptions used by a company to determine whether they are similar to those of other companies used as benchmarks. If they are not similar, then an analyst who understands accounting methods can make adjustments to make the financial statements more comparable.

Auditor's report

Financial statements submitted to a company are often required to be audited (reviewed) independent accounting firm, which then expresses an opinion on the financial statements. An audit may be required by a contractual agreement between participants, law or regulation.

Just as there are standards for the preparation of financial statements, there are standards for auditing and the expression of an auditor's opinion. International Standards on Auditing were developed by the International Auditing and Assurance Standards Committee of the International Federation of Accountants. These standards have been adopted by many countries. In accordance with International Standard on Auditing 200:

The purpose of an audit of financial statements is to enable the auditor to express an opinion on whether the financial statements are prepared, in all material respects, in accordance with applicable financial reporting practice.

Public companies may also be subject to requirements set by regulators or stock exchanges, such as appointing an independent audit committee of the board of directors to oversee the audit process. The audit process provides the basis for the independent auditor to express an audit opinion on the reliability of the financial statements that have been audited.

Because the audit is designed and performed using audit sampling techniques, independent auditors are unable to express an opinion, providing absolute confidence in the accuracy and reliability of the financial statements. Instead, the independent auditor's report provides reasonable assurance that the financial statements are presented fairly, meaning that there is a high degree of probability that the financial statements audited are free of material errors, fraud, or illegal acts that directly affect the financial statements.

Standard independent audit a report for a public company usually has several paragraphs within the framework of international auditing standards. The first or "introductory" paragraph describes the financial statements that have been audited and the responsibilities of both management and the independent auditor.

The second paragraph describes the nature of the audit process and serves as the basis for the auditor's opinion on the reliability of the financial statements. The third or opinion paragraph expresses the auditor's opinion on the reliability of these financial statements. An unqualified auditor's opinion states that the financial statements give a “true and fair view” in accordance with applicable accounting standards. This type of opinion is often referred to as unqualifiedly positive and is exactly what analysts would like to see in a financial report.

There are several other types of opinions. The modified auditor's report contains certain limitations or exceptions to the accounting standards. Exceptions are described in the audit report with additional explanatory paragraphs so that the analyst can determine the significance of the exception. An adverse auditor's opinion occurs when the financial statements deviate significantly from accounting standards and are unfairly presented.

Negative opinion (False auditor's report) makes financial statement analysis easy: Don't worry because the company's financial statements cannot be relied upon. Finally, a disclaimer of opinion occurs when, for some reason, the auditors are unable to provide an opinion.

Auditors can also express their opinion on a company's internal control systems. This information may be presented in a separate opinion or included as another item in the auditor's report related to the financial statements. The internal control system is internal system company, which is intended, among other things, to ensure that the process of creating financial statements is of high quality and predictable. Public companies are usually required to:

• Take responsibility for the effectiveness of internal controls.
• Assess the effectiveness of the internal control system using appropriate control criteria.
• Support the assessment process with sufficient competent evidence.
• Submit a report on internal control.

While these reports provide some assurance to analysts, they are not infallible. An analyst should always take a grain of salt when analyzing financial statements.

Other sources of information

The information above is generally provided to shareholders on an annual basis. Interim reports are also provided by the company either twice a year or once a quarter. Interim reports generally present the financial position of the company, but they are not audited. These interim reports may provide an update on the company's performance and financial position since the most recent annual period.

Companies may also provide relevant current information on their websites and in press releases, as well as in the business media. When analyzing financial statements, analysts must consider all of these sources of company information, as well as information from external sources regarding the economy, the industry, the company itself, and comparable companies.

Information on economy, sphere activities, as well as similar companies, is useful in analyzing the financial performance of a company and determining its condition and prospects for the near future.

Rice. 2 Stages of the financial analysis process

Analysts work in various positions. For example, the main goal of stock analysts is to evaluate the potential equity (shares) of an investment to determine whether the investment is attractive and promising, and what is an appropriate purchase price. Other credit analysts, which evaluate a company's creditworthiness to decide whether (and on what timing) a loan should be made or what credit rating should be assigned.

Analysts may also be involved in a variety of other tasks, such as assessing the performance of a subsidiary, evaluating private equity investments, or finding stocks that are overvalued for the purpose of taking a short position. This section presents a general framework for financial statement analysis that can be used in these various tasks.

Table 1 – Process of financial analysis of the company

	Information sources	Result
1. Formation of the purpose and context of the analysis.	The nature of the analyst's function, such as evaluating equity or debt investments or generating a credit rating. Communicates with the client or supervisor about the company's needs and concerns.	Defining the purpose or tasks of the analysis. A list (written or oral) of specific questions that need to be answered during the analysis process. Presentation of the content of the financial analysis result. Schedule and budgetary resources to complete the financial analysis.
2. Data collection.	Financial statements, other financial data, questionnaires, and industrial/economic data. Discussion with management, suppliers, customers and competitors. Visits to the company (for example, to production facilities or retail stores).	Analytical financial reporting. Financial data tables. Completed questionnaires, if applicable.
3. Data processing.	Data obtained in the previous stage.	Adjusted financial statements. Coefficients and graphs. Forecasts.
	Input data as well as processed data.	Analytical results.
	Analytical results and previous reports.	An analytical report that answers the questions asked in step 1.
6. Follow up.	Information collected periodically as needed to determine whether changes to findings or recommendations are necessary.

Formation of the purpose and context of the analysis.

Before conducting any analysis, it is important to understand the purpose of a particular analysis. Understanding objectives is especially important in financial statement analysis because of the numerous methods available and the significant volume of data.

Some analytical tasks are clearly defined, in which case articulating the purpose of the analysis does not require decision making by the analyst. For example, periodic review investment and debt portfolio or stock market analyst report for a particular company can be carried out in accordance with the requirements of institutional norms, that is, the requirements are set out in regulations, for example, in the Guidelines for analyzing the financial condition of organizations. In addition, the format, procedures and/or sources of information may also be proposed in domestic regulations.

For other analytical tasks, formulating the purpose of the analysis requires additional decision making by the analyst. The purpose of the analysis guides further decisions about approaches, tools, data sources, formats in which the results of the analysis should be reported, and the relative importance of different aspects of the analysis.

When there is a significant amount of data, a less experienced analyst can simply start crunching the numbers and creating outputs. It is generally desirable to resist this temptation and thereby avoid large amounts of low-informative data. Consider the questions: If you were given too much data, what conclusion would you formulate? What questions would you be able to answer? What solution will your answer support?

The analyst must also determine the context at this stage. Who is target audience? What is the final product - for example, a final report that will explain the findings and recommendations? What time frame is chosen (for what period will the financial study be conducted)? What resources and resource constraints are relevant to the analysis process? Again, the context may be predefined (i.e., standard, which is determined by institutional norms).

Having established the purpose and context of the financial statement analysis, the analyst must formulate specific questions that will be answered during the financial analysis process. For example, if the purpose of a financial statement analysis (or rather, a specific step in a larger analysis) is to compare the historical performance of three companies operating in a particular industry, specific questions would include: What was the relative growth rate of the companies, and what is the relative growth rate of the companies? profitability of companies? Which company shows the highest financial results, and which is the least effective.

Data collection.

Next, the analyst receives the data necessary to answer specific questions. A key part of this step is understanding the company's business, financial performance and financial position (including trends over time and in comparison to peer companies). For historical analysis, financial statement data alone is sufficient in some cases.

For example, to search through a large number of alternative companies with a certain minimum level profitability, only financial reporting data will be sufficient. But to address deeper questions, such as why and how one company performed better or worse than its competitors, more information is needed.

As another example, to compare the historical performance of two companies in a given industry, historical financial statements will be sufficient to determine which company was the fastest growing and which company would be a more profitable investment; however, a broader comparison with overall industry growth and profitability would obviously require industry data.

In addition, economic and industrial information is necessary to understand the environment in which a company operates. Analysts often use a top-down approach in which they (1) gain insight into macroeconomic environment, economic growth prospects and inflation, (2) analyze prospects development of the industry in which the company operates, and (3) determine the company’s prospects in the expected industry and macroeconomic environment. For example, an analyst may need to forecast future earnings growth for a company.

To forecast future growth, a company's historical data provides only one piece of information for statistical forecasting; however, understanding economic and industry conditions can improve an analyst's ability to forecast a company's earnings based on forecasts of overall economic and industry performance.

Data processing.

After receiving the necessary financial statements and other information, the analyst processes this data using appropriate analytical tools. For example, data processing may include calculating ratios or growth rates; preparation of horizontal and vertical analysis of financial statements; creating diagrams; performing statistical analysis such as regression or Monte Carlo simulation; conducting an assessment of equity participation; conducting sensitivity analysis; use of any other analytical tools or combination of tools that are available and appropriate to the task. A comprehensive financial analysis at this stage will include the following:

• reading and evaluating financial statements for each company to be analyzed. This step includes examining the company's accounting records, what methods were used (for example, when reporting income in the income statement), and what operating decisions were made that may affect the financial statements presented (for example, leasing compared to purchasing equipment).
• making any necessary adjustments to the financial statements to facilitate comparison when the unadjusted statements of the companies in question reflect differences in accounting standards, operating decisions, etc.
• preparing or compiling data for financial statements and financial ratios (which are measures of various aspects of corporate performance and are determined based on the elements of a company's financial statements). Based on a horizontal-vertical analysis of financial statements and financial performance, analysts can evaluate a company's relative profitability, liquidity, leverage, efficiency, and valuation relative to past performance and/or that of competitors.

Analysis/interpretation of processed data.

Once the data has been processed, the next step that is critical to any analysis is the interpretation of the output data. The answer to a specific financial analysis question is rarely in the form of a single number; the answer to the analytical question is based on the interpretation of the results of calculation of indicators and is used to form conclusions or recommendations. Answering specific analytical questions may be the purpose of financial analysis, but typically the analyst is required to provide a conclusion or recommendation.

Drawing up a conclusion or recommendations in an appropriate format is the next step in the analysis. The appropriate format will vary depending on the analytical task, institution or audience. For example, an investment analyst's report typically includes the following components:

• Summary and investment conclusion
• Business resume
• Risks
• Grade
• Historical and other data

The results should present those key factors that play an important role in justifying investment recommendations. An important part of this requirement is the distinction between the analyst's opinion and the facts. When preparing a report, it is necessary to present the main characteristics of the security being analyzed, which will allow the reader to evaluate the report and include the analyst’s information in his own investment process and decision making.

ROSP requires disclosure of all limitations of the analysis and any risks inherent in the investment. In addition, the ROSP requires that any report include elements important to the analysis and conclusions that will enable readers of the financial analysis to determine the quality of the conclusions.

Follow up.

The process does not end with the preparation of the report. If an equity investment is made or a credit rating is assigned, a periodic review of the subject of the financial analysis is necessary to determine whether the original conclusions and recommendations are current. If an investment is rejected, follow-up monitoring is not necessary, but it may be appropriate to determine the effectiveness of the review process (for example, if the rejected investment is found to be effective and attractive). Follow-up to the financial analysis may involve repeating all the steps presented above.

Basic financial statements, which are one of the main objects of analysis, include the income statement, balance sheet, statement of cash flows, and changes in equity.

An income statement provides information about a company's financial performance over a specified period of time. It tells you how much revenue a company generated during a period, and what expenses it incurred in generating that revenue. The equation underlying the income statement is: Revenue - Expenses = Net Income.

The balance sheet reveals what a company owns (assets) and what it owes (liabilities) at a given point in time. Equity is the portion of capital owned by the owners or shareholders of a business; It is the remaining interest in a business's assets after deducting its liabilities. The three parts of the balance sheet are represented in the accounting equation: Assets = Liabilities - Owners' Equity.

While the balance sheet and income statement measure a company's success, the cash flow statement is also essential to a company's long-term success. Disclosing the sources and uses of cash in the cash flow statement helps creditors, investors, and other users of the report evaluate a company's liquidity, solvency, and financial flexibility.

The statement of changes in owners' equity reflects information about increases or decreases in the equity of a company's owners.

In addition to financial statements, a company provides other sources of financial information that are useful to the financial analyst. As part of the analysis, the financial analyst must read and evaluate the information presented in the financial note, notes, notes, exhibits, etc. Analysts should also evaluate disclosures regarding the use of alternative accounting methods, estimates and assumptions.

Public companies must also have their year-end financial statements independently audited. The auditor's opinion provides assurance that the financial statements fairly reflect the company's performance and financial position. It is also desirable to demonstrate that the company's internal control system is effective.

The Financial Statement Review Process Framework provides steps that can be taken in any financial statement review project, including:

• Formulating the purpose and context of the analysis.
• Collection of initial data.
• Data processing.
• Analysis/interpretation of processed data.
• Formation of conclusions and recommendations.
• Follow up.

List of sources used

Thomas R. Robinson, International financial statement analysis / Wiley, 2008, 188 pp.

Kogdenko V.G., Economic analysis/ Tutorial. - 2nd ed., revised. and additional - M.: Unity-Dana, 2011. - 399 p.

Buzyrev V.V., Nuzhina I.P. Analysis and diagnostics of financial and economic activities of a construction enterprise / Textbook. - M.: KnoRus, 2016. - 332 p.

Insufficient financial stability can lead to a lack of funds to finance current or investment activities, and excess will hamper development, increasing capital turnover and reducing profits. Financial analysis allows us to substantiate the parameters of such sustainability. It not only makes it possible to judge the current position of the enterprise, but also serves as the basis for developing strategic decisions that determine the development prospects of the company.

Managing any object requires, first of all, knowledge of its initial state, information about how the object existed and developed in the periods preceding the present. Only by obtaining sufficiently complete and reliable information about the activity of an object in the past, about the prevailing trends in its functioning and development, can one develop confident management decisions, business plans and development programs for objects for future periods. The stated position applies to enterprises and firms, regardless of their role, scale, type of activity, or form of ownership.

In a market economy, it is especially important to determine financial stability of enterprises, that is, the state of financial resources in which an enterprise can freely maneuver funds in order to, through their effective use, ensure an uninterrupted process of production and sales of products, as well as incur costs for expanding and updating the production base.

Determining the boundaries of financial stability of enterprises is one of the most important problems in market economy. Insufficient financial stability can lead to the insolvency of organizations, a lack of funds to finance current or investment activities, and bankruptcy, while excessive financial stability will hinder development, leading to the appearance of excess inventories and reserves, increasing capital turnover periods, and reducing profits.

The parameters of such stability can be substantiated the financial analysis. Such an analysis not only makes it possible to judge the situation of the enterprise at the moment, but also serves as the basis, a necessary prerequisite for the development of strategic decisions that determine the development prospects of the company.

We also note that where there is a high culture of enterprise management, any annual and even quarterly report on the activities of the enterprise is accompanied by a financial analysis of its activities.

Analysis of the financial and economic activities of enterprises is associated with processing of extensive information, characterizing the most diverse aspects of the functioning of an enterprise as a production, financial, property, and social complex. Most often, this data is concentrated in financial reporting documents, the enterprise’s balance sheet, and accounting statements. Thus, accounting data serves as the documentary and information basis for analyzing the financial condition and economic activities of enterprises. These data themselves allow us to make judgments about the state of affairs at the company, but in-depth analysis also requires their processing.

As is known, Accounting at enterprises it is carried out not only in for the purpose of reflecting business transactions and transactions carried out by the enterprise, recording cash assets, income, and sources of their formation. Financial reporting data is used in the process of developing, justifying, and making management decisions. Planning the direction and areas of activity, development of the enterprise, development and implementation of projects of an innovative and production profile, organizational and personnel measures to improve the activities of the enterprise, increase work efficiency in one way or another are related to the preliminary analysis of reporting.

The main purpose of financial analysis— obtaining several basic, most informative parameters that give an objective and accurate picture of the financial condition of the enterprise, its profits and losses, changes in the structure of assets and liabilities, in settlements with debtors and creditors. Such information can be obtained as a result of a comprehensive analysis of financial statements using scientifically based methods.

The result of financial analysis is an assessment of the state of the enterprise, its property, assets and liabilities of the balance sheet, the rate of capital turnover, and the profitability of the funds used.

Analysis of the financial position of an enterprise allows you to track trends in its development, give a comprehensive assessment of economic and commercial activities and, thus, serves as a link between the development of management decisions and the production and entrepreneurial activities themselves.

Who uses the analysis results and how?

Various types of business analysis and their results are widely used by a wide variety of stakeholders.

Typically, in business activities, a distinction is made between financial accounting and management (accounting) accounting. Financial Accounting is based on accounting information that, in addition to being used within the company by management, is communicated to those outside the organization. Management Accounting covers all types of accounting information that is measured, processed and communicated for internal management use. The division of accounting that has developed in practice gives rise to a division of analysis into external and intra-economic analysis.

External financial analysis can be carried out by interested parties. The basis for such an analysis is mainly the official financial statements of the enterprise, both published in the press and presented to interested parties in the form of a balance sheet. For example, to assess the stability of a particular bank, the client looks at the banks’ balance sheets and, based on them, calculates certain indicators for comparison with stable banks. But, unfortunately, a complete, comprehensive analysis cannot be done due to the incompleteness and limited information presented in the financial and accounting documentation.

External analysis includes analysis of absolute and relative indicators of profit, profitability, balance sheet liquidity, solvency of the enterprise, efficiency of use of borrowed capital, and general analysis of the financial condition of the company.

In contrast to him internal financial analysis necessary and carried out in the interests of the enterprise itself. On its basis, control is exercised over the activities of the enterprise, not only over financial activities, but also over organizational ones, and further ways of production development are outlined. The basis for such an analysis are the financial documents (reports) of the enterprise itself, this is the balance sheet in extended form, all kinds of financial reports, not only for a certain date (month, year), but also current ones, which allows you to have a more accurate description of the affairs and stability of the enterprise. The main direction of internal financial analysis is analysis of the effectiveness of capital advances, the relationship of costs, turnover and profit, the use of borrowed capital, and equity. In other words, all aspects of the enterprise’s economic activities are studied. Often certain areas of such analysis may be trade secrets.

Based on the types and purposes of the analysis, it is possible to identify a conditionally external and internal circle of people interested in such information.

TO external circle of people usually include users with direct and indirect financial interests, and internal first of all the administration.

The first group of people includes users with the so-called direct financial interest m: investors, creditors, suppliers, buyers and clients, business partners. Based on data from public financial statements, they draw conclusions about the profitability and liquidity of the company, what the company's financial prospects are in the future, whether it is worth investing in it, and whether the company has the money to pay interest and repay debts on time.

Investors evaluate a company's potential profitability because it determines the value of the investment (the market value of the company's equity shares) and the amount of dividends the company will pay. The lender evaluates the company's potential to repay loans.

Users of financial analysis with an indirect financial interest include: government bodies and extra-budgetary funds, tax authorities, investment institutions, commodity and stock exchanges, insurance organizations, firms performing external audits.

Information about the financial activities of enterprises is necessary for this group to monitor compliance by enterprises with obligations to the state, the correct payment of federal and local taxes, to resolve issues of tax benefits, methods and means of privatization and corporatization of an enterprise. State regulatory bodies, based on the results of financial analysis, develop generalized synthetic estimates that make it possible to judge the situation not only of one or several enterprises, but also of the industry as a whole and the region.

Companies listed on investment funds and stock exchanges must submit special financial reports to them. In addition, users of information with an indirect financial interest include auditors and audit firms, consultants financial matters, lawyers and law firms, press and news agencies, the public.

TO internal users The results of financial analysis include the administration. Administration- these are the owners and management personnel of the company who bear full responsibility for managing the activities of the enterprise and achieving its goals.

The successful activities of the administration are based on correctly made management decisions resulting from the analysis of accounting data.

The activities of the administration of any enterprise are aimed at achieving a system of goals. However, in a competitive environment, all efforts must be focused on the two main goals of any business: profitability (profitability) and liquidity. Profitability is the ability to earn a profit sufficient to attract and retain investment capital. Liquidity is the availability of sufficient means of payment to pay debts on time. As is known, the relationship between these indicators is often inverse: the higher the profitability, the lower the liquidity.

The administration must constantly have the following data on the financial and economic activities of the enterprise: the amount of net profit for the reporting period, the correspondence of the rate of profit to the expected results, the availability of sufficient funds, a list of the most profitable products, the cost of each product produced. Based on the available information, leaders and managers make management decisions.

As you can see, the range of users of financial analysis and areas of their application is very wide. At the same time, users of financial information may be interested in certain various aspects of the enterprise’s activities. This circumstance predetermines the need for not only an integrated, but also a comprehensive approach to analyzing the activities of an enterprise for internal and external use.

The administration is not limited only to internal financial analysis, but, if possible, complements it with external analysis, carried out by certain specialized firms. This is due not only to the fact that “one knows better from the outside,” but also to a greater breadth of analysis, carried out taking into account the competitiveness of other companies and therefore making it possible to evaluate oneself in an unbiased, comprehensive manner, which will allow one to more accurately formulate the primary objectives of one’s development.

Let's look at the 12 main ratios of financial analysis of an enterprise. Due to their wide variety, it is often difficult to understand which ones are basic and which are not. Therefore, I tried to highlight the main indicators that fully describe the financial and economic activities of the enterprise.

In the activity of an enterprise, its two properties always collide: its solvency and its efficiency. If the solvency of the enterprise increases, then efficiency decreases. One can observe an inverse relationship between them. Both solvency and operational efficiency can be described by coefficients. You can focus on these two groups of coefficients, however, it is better to split them in half. Thus, the Solvency group is divided into Liquidity and Financial Stability, and the Enterprise Efficiency group is divided into Profitability and Business Activity.

We divide all financial analysis ratios into four large groups of indicators.

1. Liquidity ( short-term solvency),
2. Financial stability ( long-term solvency),
3. Profitability ( financial efficiency),
4. Business activity ( non-financial efficiency).

The table below shows the division into groups.

In each group we will select only the top 3 coefficients, in the end we will get a total of 12 coefficients. These will be the most important and main coefficients, because in my experience they are the ones that most fully describe the activities of the enterprise. The remaining coefficients that are not included in the top, as a rule, are a consequence of these. Let's get down to business!

Top 3 liquidity ratios

Let's start with the golden three of liquidity ratios. These three ratios provide a complete understanding of the liquidity of the enterprise. This includes three coefficients:

1. Current ratio,
2. Absolute liquidity ratio,
3. Quick ratio.

Who uses liquidity ratios?

The most popular among all ratios, it is used primarily by investors in assessing the liquidity of an enterprise.

Interesting for suppliers. It shows the company’s ability to pay its counterparties-suppliers.

Calculated by lenders to assess the quick solvency of an enterprise when issuing loans.

The table below shows the formula for calculating the three most important liquidity ratios and their standard values.

	Odds	Formula	Calculation	Standard
1	Current ratio	Current ratio = Current assets/Current liabilities	Ktl= p.1200/ (p.1510+p.1520)
2	Absolute liquidity ratio	Absolute liquidity ratio = (Cash + Short-term financial investments) / Current liabilities	Cable = page 1250/(p.1510+p.1520)
3	Quick ratio	Quick ratio = (Current assets - Inventories) / Current liabilities	Kbl= (p.1250+p.1240)/(p.1510+p.1520)

Top 3 financial stability ratios

Let's move on to consider the three main factors of financial stability. The key difference between liquidity ratios and financial stability ratios is that the first group (liquidity) reflects short-term solvency, and the latter (financial stability) reflects long-term solvency. But in fact, both liquidity ratios and financial stability ratios reflect the solvency of an enterprise and how it can pay off its debts.

1. Autonomy coefficient,
2. Capitalization rate,
3. Ownership ratio working capital.

Autonomy coefficient(financial independence) is used by financial analysts for their own diagnostics of their enterprise for financial stability, as well as by arbitration managers (in accordance with the Decree of the Government of the Russian Federation of June 25, 2003 No. 367 “On approval of the rules for conducting financial analysis by arbitration managers”).

Capitalization rate important for investors who analyze it to evaluate investments in a particular company. A company with a large capitalization ratio will be more preferable for investment. Too much high values the coefficient is not very good for the investor, since the profitability of the enterprise and thereby the income of the investor decreases. In addition, the coefficient is calculated by lenders; the lower the value, the more preferable it is to provide a loan.

recommendatory(according to the Decree of the Government of the Russian Federation of May 20, 1994 No. 498 “On some measures to implement legislation on the insolvency (bankruptcy) of an enterprise", which became invalid in accordance with Decree 218 of April 15, 2003) is used by arbitration managers. This ratio can also be attributed to the Liquidity group, but here we will assign it to the Financial Stability group.

The table below presents the formula for calculating the three most important financial stability ratios and their standard values.

	Odds	Formula	Calculation	Standard
1	Autonomy coefficient	Autonomy ratio = Equity/Assets	Kavt = page 1300/p.1600
2	Capitalization rate	Capitalization ratio = (Long-term liabilities + Short-term liabilities)/Equity	Kcap=(p.1400+p.1500)/p.1300
3	Provision ratio of own working capital	Working capital ratio = (Equity capital - Non-current assets)/Current assets	Kosos=(p.1300-p.1100)/p.1200

Top 3 profitability ratios

Let's move on to consider the three most important profitability ratios. These ratios show the effectiveness of cash management at the enterprise.

IN this group indicators includes three coefficients:

1. Return on assets (ROA),
2. Return on equity (ROE),
3. Return on Sales (ROS).

Who uses financial stability ratios?

Return on assets ratio(ROA) is used by financial analysts to diagnose the performance of a business in terms of profitability. The ratio shows the financial return from the use of the enterprise's assets.

Return on equity ratio(ROE) is of interest to business owners and investors. It shows how effectively the money invested in the enterprise was used.

Return on sales ratio(ROS) is used by the sales manager, investors and the owner of the enterprise. The coefficient shows the efficiency of sales of the main products of the enterprise, plus it allows you to determine the share of cost in sales. It should be noted that what is important is not how many products the company sold, but how much net profit it earned from these sales.

The table below shows the formula for calculating the three most important profitability ratios and their standard values.

	Odds	Formula	Calculation	Standard
1	Return on assets (ROA)	Return on assets ratio = Net profit / Assets	ROA = p.2400/p.1600
2	Return on equity (ROE)	Return on Equity Ratio = Net Profit/Equity	ROE = line 2400/line 1300
3	Return on Sales (ROS)	Return on Sales Ratio = Net Profit/Revenue	ROS = p.2400/p.2110

Top 3 business activity ratios

Let's move on to consider the three most important coefficients of business activity (turnover). The difference between this group of coefficients and the group of Profitability coefficients is that they show the non-financial efficiency of the enterprise.

This group of indicators includes three coefficients:

1. Accounts receivable turnover ratio,
2. Accounts payable turnover ratio,
3. Inventory turnover ratio.

Who uses business activity ratios?

Used by the CEO, commercial director, head of sales, sales managers, financial director and financial managers. The coefficient shows how effectively the interaction between our enterprise and our counterparties is structured.

It is used primarily to determine ways to increase the liquidity of an enterprise and is of interest to the owners and creditors of the enterprise. It shows how many times in the reporting period (usually a year, but it can also be a month or a quarter) the company repaid its debts to creditors.

Can be used by commercial director, head of sales department and sales managers. It determines the efficiency of inventory management in an enterprise.

The table below presents the formula for calculating the three most important business activity ratios and their standard values. There is a small point in the calculation formula. The data in the denominator are usually taken as averages, i.e. The value of the indicator at the beginning of the reporting period is added up with the end one and divided by 2. Therefore, in the formulas, the denominator is 0.5 everywhere.

	Odds	Formula	Calculation	Standard
1	Accounts receivable turnover ratio	Accounts Receivable Turnover Ratio = Sales Revenue/Average Accounts Receivable	Code = p.2110/(p.1230np.+p.1230kp.)*0.5	dynamics
2	Accounts payable turnover ratio	Accounts payable turnover ratio= Sales revenue/Average accounts payable	Kokz=p.2110/(p.1520np.+p.1520kp.)*0.5	dynamics
3	Inventory turnover ratio	Inventory Turnover Ratio = Sales Revenue/Average Inventory	Koz = line 2110/(line 1210np.+line 1210kp.)*0.5	dynamics

Summary

Let's summarize the top 12 ratios for the financial analysis of an enterprise. Conventionally, we have identified 4 groups of enterprise performance indicators: Liquidity, Financial stability, Profitability, Business activity. In each group, we have identified the top 3 most important financial ratios. The resulting 12 indicators fully reflect all financial and economic activities of the enterprise. It is with their calculation that financial analysis should begin. A calculation formula is provided for each coefficient, so you will not have any difficulties calculating it for your enterprise.