2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16
Fiscal year is a period of time for which business entities (enterprises, budgetary organizations) prepare reports on their activities, as well as the period for which the state budget is drawn up and acts.
This concept is used in the financial analysis of the company. Within its framework, an analysis of the balance sheet is carried out - its structure and dynamics, liquidity ratios, calculation of net assets, profitability and turnover of assets, profitability of activities based on the income statement. Financial analysis is the study of changes in key indicators of development and the state of the company in order to determine its financial stability, solvency, creditworthiness, prospects. Financial stability reflects the company's ability to optimally use its funds to ensure an uninterrupted cycle of production and sales of products (rendering services), as well as to invest in expanding and developing the business, updating the material and technical base. As a rule, when analyzing the dynamics of the above indicatorscompare the last financial year and the previous three.
Who conducts, for whom (and why) do you need an analysis of the company's activities? There are two categories of users of financial statements and the results of such analysis: internal and external. Employees or management of the company are engaged in internal financial analysis in order to control financial and organizational activities, as well as to identify further prospects and reserves for the development of the company. The sources of internal financial analysis are the extended balance sheet, various financial statements (including profit and loss), statements for past periods, for the current financial year and for the present. The main point of internal financial analysis is the calculation of capital efficiency, the relationship between costs, turnover and profit, attraction of borrowed and own funds. In other words, all aspects of the company's activities are considered. Often, the indicators and conclusions of such an analysis are trade secrets.
The goals of internal financial analysis can be: increase profits, search for reserves to reduce costs and increase revenues, develop a new market, reduce receivables for the next financial year and subsequent periods. The results of internal analysis are used by the owners and top managers of the company.
External financial analysis is carried out by interested third-party organizations and individuals on the basis of open and public financial reporting. These can be creditors, shareholders, suppliers, buyers, business partners, investors. The results of an external financial analysis are important for banks, leasing companies when considering the possibility of lending to a company (whether it will be able to pay off the loan and interest); for potential shareholders and investors when assessing the feasibility of investing in this company; to the state - for taxation; arbitration manager - to identify opportunities to get out of bankruptcy or to prevent insolvency and bankruptcy of the enterprise.
In different countries, the reporting year is set differently, often coinciding with the calendar year, but there are historical exceptions. For example, the fiscal year in the United States is set from October 1 to September 30, in the Russian Federation - from January 1 to December 31.
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