Written by Jeenal Jain | September 28, 2022
The world today is getting advanced day by day as each sector of businesses is moving ahead with coming technology and advanced software to beat the competition in the market and provide the best version of themselves. Financial statement analysis focuses on the company’s financial operations, evaluations of its strengths, and in-depth research into its problem areas. For instance,
The same is the case with the Fintech Industry. The financial statement analysis tool is a new technology in the finance sector that competes with traditional financial operations in delivering financial services. It is an advanced tool that unifies technology and automation to enhance activities in the finance sector.
Financial Statement Analysis is concerned with the financial operations of the firm, assessments of its strengths, and deep analysis into the areas of concern in the company. It determines the logic and connection between the financial statements to deliver meaningful outcomes. It aims to examine, interpret, compare, and portray valuable relationships among the financial data generated.
The tool provides timely reports and instant analysis to determine various aspects of the financial sector that is useful in making well-informed decisions in the future for the well-being of the company, such as:
The financial statement analysis tool is of great importance for both internal and external affairs, such as lending process, investment, security analysis, and management operations. However, there are many critical features associated with financial statement analysis as it is one of the crucial data of any organization. Let us look at various components of the financial statement analysis in detail.
Comparative analysis is performed to evaluate the financial position of the organization. It analyzes the balance sheet and income statement to compare the current year’s financial information to the previous years, which helps determine the company’s growth or loss.
For example: When an investor desires to invest in either of the companies, he will easily be able to decide by comparing the percentage of increment or decrement in the net profit of the companies.
This analysis is conducted vertically, transforming complex data into a compact structure. The process displays the relationship of individual items in terms of percentage with a single base. It can likewise be utilized horizontally while contrasting information of previous years for similar firms or more than one firm.
For example, while analyzing the income statement, the standard base taken is Net Sales, or while analyzing the balance sheet, the base is Total Resources.
These proportions are utilized for determining economic position, productivity, further assessment, and decision-making towards the end of the financial year.
There are different categories of ratios as per the required purpose:
Trend Analysis is conducted so as to analyze the change that occurred in the behavior of financial data over a progression of years through Trend Ratios or Index Numbers. It is generally required to examine the comparison in the long term and estimate and plan the budget for the following financial year.
The main criteria behind cash flow analysis are to represent the motion of cash and cash counterparts in a year. The investigation assesses the net increment or decline in money from inflow and outflow by financial, operating, and investing activity.
The fund flow is a tool of Financial Statement Analysis that shows how the organization has been funded. This assertion displays the outline of sources and use of assets. It portrays the monetary well-being of an organization by assessing changes in working capital during the year.
As every sector is getting advanced with the introduction of new technology and tools, the finance sector is also achieving the goal of providing the best services with the help of financial statement analysis tools. Its significance has been notable in the modern world, and it includes:
Financial Statement Analysis is a process where both internal and external beneficiaries benefits to carry positive outcomes out of the report and helps streamline the analysis process. Most of the reports generated by businesses are found in unstructured format and involve scanned pictures, making data collection, financial statement analysis, and decision-making tasks a big challenge. Understanding the need for an intelligent tool that could ease the process of generating a clean report out of financial statements released by the company, Perfios brings a platform, Financial Statement Analyzer (FSA), that not only automates the collection, analysis, and administration of the financial statements but also generates a financial and valuation report in an organized format. So, advance your business with Perfios and achieve a high success rate in the highly competitive world.
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