Financial analysis of a company

Financial analysis is a very detailed examination of the financial and economic condition and business results of a company. It is performed based on the financial statements of that entity: the balance sheet, income statement, cash flow statement, statement of changes in equity, notes, closing accounts, excerpts from accounting records, and similar documents.

Based on a financial analysis, the real and objective financial situation of the company is assessed. The information obtained from the financial analysis serves as a starting point for taking measures and actions aimed at improving the company's creditworthiness and business and development trends. Among other things, financial analysis should provide answers to the following questions:

• What is the structure of a company's assets and its sources of financing?;
• What is its liquidity and solvency?;
• What is the actual and what is the optimal scope of inventory and working capital?;
• where the company is located in terms of business success;
• How does management finance investments?;
• Is the company making a sufficient profit?;
• What business and financial risks is it exposed to, and to what extent?;
• what is the debt and financial stability;-where is the break-even point;
• Do owners receive sufficient funds based on their ownership and similar factors.

Financial analysis shows the efficiency and effectiveness of financial policy, as one of the basic elements of company financial management. The results of financial analysis are significant for forming an adequate financial policy. Financial policy, as an integral part of the company's overall business policy, represents the basis of company financial management. This function is performed by the company's financial management.

Financial analysis can be performed using various methods, and it results in corresponding financial indicators, which can be grouped into several basic categories:

•  Financial structure indicators
• Liquidity indicators
• Financial stability and security indicators
• Net working capital (NWC)
• Debt Ratios
• Activity indicators
• Revenue and Expense Structure Indicators
• Indicators of business economy
• Profitability indicators
• Break-even point
• Leverage
• Bankruptcy prediction.