Conducting company's financial condition research

Blog

04 March 2023

"Where are we now? How effectively are our assets being utilized? Is everything going according to plan?" These are the questions that an organization contemplating transformations or significant changes must answer. In order to assess the current state of affairs, forecast outcomes, and identify potential risks, the company conducts financial analysis of its operations.

What should be analyzed?

The analysis of financial condition can be divided into three blocks: assets, capital utilization efficiency, and system stability.

Asset position and capital structure: Specialists examine where the company's resources are located, how they are accounted for, and how funds are replenished.
Capital utilization efficiency: The profitability of assets, the speed of fund turnover, and the return on investment are evaluated.
Stability and solvency: Experts calculate how well the chosen financial model suits the company, in terms of facilitating liquidity of funds and overall system solvency. They measure the creditworthiness of the financial structure and assess potential risks for the organization.

Financial analysis is conducted using comprehensive methodologies, for which specialists gather information and data

What data is needed for a detailed analysis?

The analysis should be as detailed as possible and based on objective and current information. To obtain the necessary data, the following internal documents and processes are analyzed:

Financial statements, assets, and liabilities.
Revenues, receipts, net profit, losses, and financial results for a fixed period.
Capital movements, dynamics, and factors of change.
Receipts, payments, and other documents reflecting financial transactions.
Business plans and project budgets.

The analysis of financial condition can be conducted by both internal specialists and external experts. An expert assesses the level of investment risk, impartially evaluates the system's efficiency, competitiveness, and forecasts profitability based on market trends rather than solely internal organizational trends. The results of the analysis are presented in the form of clear tables and calculations

How is the analysis of a company's financial condition organized?

The expert conducts the study and analysis in several stages, making the process systematic and comprehensive.

1. Goal setting and defining the analysis format:

The financial analyst determines the questions that will help gather data and selects methodologies for collecting indicators. They also determine who will use the obtained figures, in what format to systematize them, and what constitutes confidential information.

2. Preliminary examination of the company's current operations:

Information about the organization's working conditions, the extent to which financial indicators align with plans, and asset data are necessary.

3. Analysis of the company's asset and financial condition:

The data provides insights into the company's stability and prospects.

4. Interpretation and evaluation of the analysis data:

The expert determines the effectiveness of various types of resources used by the enterprise, the alignment of indicators with the plan, and overall profitability.

5. Balance assessment:

The goal is to assess the company's solvency level, potential for development, and growth.

Financial analysis not only helps identify vulnerable segments but also reveals strengths and untapped potential that may have been overlooked or hidden previously.

How are the obtained data used?

Based on the data obtained during the analysis, financial forecasts and future plans are formulated.

The progress will depend on how thoroughly the processes are studied, the objectivity of the indicators, and the extent to which company departments are involved in the change efforts.

Responsible departments develop specific steps, and the management makes managerial decisions to address issues and streamline processes.

An external expert provides recommendations for changes, equipping the company with tools that automate processes, streamline communications, and establish reporting systems. The hired specialist assists in implementing programs that efficiently gather facts, control cash flows, and streamline contract and payment systems.