Category: Tax & Accounting Services
Written by Zahrial Fakhri on 28/11/2023
The author’s views are entirely their own and may not always reflect the views of Putranto Alliance.
Understanding financial analysis is crucial for evaluating a performance of company across various stakeholders. By utilizing diverse financial analysis tools, stakeholders can gain valuable insights into critical finance aspects of a company, making it an indispensable process for assessing and comprehending overall performance. Analysing a company can be challenging, and the choice of analysis tools depends on the specific aspects of performance that stakeholders want to evaluate.
Financial statement analysis involves delving into a financial record of a company to gain insight into its financial position. The process aims to inform decisions such as investment choices by identifying specific items within financial statements of a company across multiple reporting periods. This evaluation is crucial for stakeholders to understand the financial health and performance of a company.
Financial statement analysis holds significant importance for various stakeholders by employing financial analysis tools, decision-makers can gain valuable insights into essential finances elements of a company, enabling the stakeholders to make informed decisions. This process is critical for assessing and comprehending overall performance and is essential for:
The best time to conduct financial statement analysis depends on the specific needs and objectives of the stakeholders involved. Here are some key considerations:
Financial statement analysis offers numerous benefits for stakeholders in various capacities. Here are some key advantages:
Financial statement analysis involves a systematic process that requires attention to detail and a thorough understanding of financial concepts. Here is a step-by-step guide on how to conduct financial statement analysis effectively:
Our financial experts offer tailored solutions to navigate the complexities of financial statement analysis, ensuring informed decision-making based on accurate financial data. Here is how Putranto Alliance can assist you with our deep understanding of diverse industries:
Putranto Alliance will provide ongoing support to implement recommendations and track progress over time, serving as the company trusted partner in financial analysis and strategic planning.
Financial analysis helps businesses understand their financial strengths and weaknesses, identify areas for improvement and attract investors. It provides valuable insights into the financial health and performance of the company.
There are two methods commonly used in financial analysis statements which are horizontal or vertical analysis and ratio analysis.
Horizontal analysis compares two or more accounting periods to reveal the changes presented by absolute number and percentage comparison, while vertical analysis tells the proportion of an account to its benchmark which is a total asset for the balance sheet and net sales for income statements in a single period.
Common financial ratios include liquidity ratios (current ratio, quick ratio, cash ratio), profitability ratios (return on asset, return on equity, net profit margin, and gross profit margin), and solvency ratios (debt-to-equity ratio, and interest coverage ratio).
Financial analysis statements should be conducted regularly, typically quarterly or annually, to track performance over time and identify trends. However, the frequency may vary depending on the needs of the business and external factors affecting the industry. By routinely examining financial performance indicators, typically on a quarterly or annual basis, businesses can gain valuable insights into the financial health and trajectory. This consistent monitoring allows for the identification of emerging trends and the evaluation of overall performance against established benchmarks.
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