Analysis of the financial performance of the enterprise: goals, methodology

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Control, of course, is an important part of the work to ensure the activities of any organization. It can take many different forms, each of which has its own characteristics and specifics. Control can be current when carried out in the course of activity. It is also based on data that are summed up as a result for a certain time period. In this case, first of all, they remember the analysis of the financial results of the enterprise / organization. That's what we'll talk about.

General information

Analysis of the financial performance of an enterprise is the calculation, interpretation and evaluation of a set of indicators that characterize various aspects of the functioning of a commercial organization. Two components are of the greatest importance. These are the physical indicators of production and cash flows of the organization. If one of them is ignored, the real state of affairs will be underestimated, which will lead to an error in the plans and management actions taken. And as a natural result - significant losses. But they can be prevented if the ongoing activities of the organization are regularly and adequately analyzed. Indeed, in this case, it is easy to ensure the literacy of management, and as a natural result - effective functioning and development.

What is the purpose of analyzing the financial performance of the enterprise? This is obtaining a small number of the most informative (key) parameters that allow you to create an accurate and objective picture of the state of the organization, assess its profits and losses, changes in the structure of liabilities and assets. Moreover, interest can be provided by both the current position and the projection for the near or somewhat distant future.

More specifically, the goals are affected by the tasks of analyzing the financial results of the enterprise. In fact, this is a specification that takes into account organizational, technical, methodological and informational capabilities and needs. The main factor in this case is the volume and quality of data. Here it is necessary to keep in mind one important point! Namely, that financial and accounting statements are simply raw information that needs to be processed. The path of action in this case is chosen by a specialist who is engaged in analysis and focuses on tasks.

Ohpersonnel moments and used solutions

Typically, financial policies are adjusted by top management and/or owners. Therefore, all data processing is primarily needed for internal data. After all, the analysis of the management of the financial results of the enterprise should help to choose the most optimal ways to stabilize and improve the position of the commercial structure. This is achieved through various measures that contribute to the optimization of the state of the organization. When the micro- and macroeconomic environment changes, they need to be reviewed. But with what? And in this case, the method of analyzing the financial results of the enterprise is used.

How? Initially, a system of relative indicators is needed, which are calculated using the available data. This is enough to have an accurate idea of the position of the organization. By studying the dynamics of change, you can determine the development trend and make a certain decision.

What needs attention? The form and content of the balance sheet, income statements and other documents and necessary applications. They should be studied sequentially so that a clear picture gradually forms.

It is common practice when two years are taken into account - the reporting year and the previous one before it. If the data is not comparable, then it must be processed, adjusted for further use. But in this case, it is necessary to add an explanatory note, inwhich will indicate the reasons that caused the changes. Various components should be interconnected and reflect different aspects of the same facts from the economic life of the enterprise.

All received data is structured in a convenient form and transferred to make a management decision. At this point, the analysis of financial performance indicators of the enterprise is considered completed.

Who needs all this information?

Let's take a closer look at the purpose for which the received data is transmitted to different groups of people:

1. Investors. They invest their own capital in the enterprise to obtain a certain level of income. This comes with risk. And in order to have an idea of the structure and position of the organization, they want to regularly review financial analysis data.
2. Creditors. These are people or (more often) an organization that temporarily provide a loan on the terms of receiving a certain income in the form of interest. And they are interested in information that will allow them to judge whether the company will be able to make all the necessary payments on time.
3. The leadership of the organization. They need all this data to evaluate the effectiveness of their management.
4. Employees of the organization. They are interested in information related to the timely payment of wages, pension and other payments.
5. Suppliers. Their interest is fueled by the question of whether all necessary and dueamount.
6. Consumers. They see the financial viability of the organization as a guarantee of stable supply.
7. State and public organizations. They are interested in the financial he alth of individual parts of the economic system and its whole.

When all of them make economic decisions, the analysis of the financial results and efficiency of the enterprise allows us to judge the nature of the internal organization and performance. The final indicator is the profit of the commercial structure. In a market economy, it is the most important stimulus for ongoing activities, and also creates the basis for expansion. The amount of profit depends on the volume of sales, assortment, its quality, level of costs, information processes and taxes. Everyone is interested in the best scenario.

A few words about profits

Each commercial structure is interested in constantly providing a steady increase in profits. Alas, reality often runs counter to desires. But it is quite possible to increase the size and magnitude of the chance for the growth of indicators. What role does the analysis of the financial condition and performance of the enterprise play in this? Let's talk about everything in order.

Two main groups of indicators can be conditionally distinguished: absolute and relative. In the first case, these are the results of sales, ordinary activities and other operations. Here, the indicator of net profit is important - that is, income that remains at the disposal of the commercialstructures after taxes have been paid. Relative indicators include everything that allows you to evaluate profitability. How does financial performance analysis fit into this? The fact is that he:

1. Evaluates changes for each specific indicator for a certain selected period.
2. Allows you to organize all data in a structural view and track their dynamics.
3. Reveals all changes for the selected periods.
4. Sets the degree of influence of individual factors on the amount of profit received, as well as the reasons that led to them.

From all this, you can specify the main tasks:

1. Assessment of the dynamics and level of relative and absolute indicators of financial results. Primarily interested in profitability and profit.
2. Studying the structure of income received.
3. Determination of the degree of influence of various factors on the amount of profit received and the level of profitability.
4. The study of the distribution, direction and use of enterprise income.
5. Analysis of relative indicators in order to find the threshold of profitability.
6. Search for possible reserves and ways to mobilize them.

Working with accounting information

The most interesting is the form number 2, which is called the "Profit and Loss Statement". The information obtained from it serves as the basis for all work. In addition, data contained in forms No. 1, 3, 5, 11 andjournal orders No. 10, 11, 15. Also, do not forget about the information contained in the business plan and analytical accounting, namely accounts No. 90, 91 and 99. The data presented here should be more than enough.

In addition, it is necessary to take into account the accounting policy pursued by the enterprise. After all, the possibility of making maneuvers in the distribution of costs between work in progress and finished products depends on this. The creation of estimated reserves, the write-off of deferred expenses - all this must be taken into account. What issues should be given initial attention? You can recommend to think about:

1. Methods of calculating depreciation on fixed assets and tangible assets, their evaluation when released into production and attributing certain types of expenses to the cost of created products (reservation).
2. Formation of the composition of overhead costs, as well as their distribution.

In this case, it is necessary to separately consider such concepts as economic and accounting profit. In the first case, the amount of income that is predicted or expected is implied. Whereas accounting profit is the funds actually received and reflected in the registers for a certain period. An analysis of the formation of the financial results of an enterprise cannot do without these concepts. But mixing them is not a desirable option. Indeed, in this case, a qualitative assessment of the activity will not work.

What and how in reality?

The article would be incomplete without an analysis of financial resultsactivities of the enterprise on an example. Therefore, let's look at what and how. Suppose we have a need to evaluate the dynamics of book profit. What will be of interest to us? In the analysis, you need to get the following profit indicators:

1. Balance.
2. From the sale of services, works and products.
3. Taxable.
4. From another implementation.
5. Clean.
6. Out-of-sales results.

Balance sheet income is that part of income that is the basis for calculating taxes that must be paid to the budget. All that remains is the net income of the enterprise. Accounting and analysis of the financial performance of an enterprise involves determining the composition, structure, dynamics and implementation of the plan for the analyzed period.

And what is our task? Find dynamics. In this case, the comparison method is suitable when indicators of the reporting period and the previous one are used. In this case, it is necessary to take into account the influence of inflationary processes. You can use price index recalculation to compare the indicators. In addition, a large number of factors affect the amount of balance sheet profit. These are profit from sales activities and other financial results, which are affected by the volume, structure, cost and prices of products, works and services. An additive factorial model is used to establish the relationship between them.

And what if it is necessary to analyze and evaluate the financial performance of the enterprise from a slightly different position? For example, to assess the degree of influence of factors? In such cases, assistance mayprovide ways of valuable substitutions or absolute differences. If an enterprise creates heterogeneous types of products, then it is additionally necessary to take into account the structural factor.

About impact, cost and profit

The change in socio-economic development during the transition to market relations has led to qualitative shifts in production. This led to the growth of cash savings, as well as an increase in the profits of various forms of ownership. The most important factors in this are:

• increase in the volume of created and sold products,
• improving labor productivity,
• introduction of scientific and technical developments,
• reducing the cost and improving the quality of created goods.

Growth in profits is possible with a reduction in spending and an increase in the size of activities. All this affects the financial result, which is investigated. At the same time, it must be taken into account that it is formed from natural resources and raw materials, basic and auxiliary materials, energy, labor resources, fixed assets and other expenses. Their composition and structure depend on the conditions and nature of production, the form of ownership, and the ratio of different positions. All this should take into account the analysis of the financial and economic results of the economic activity of the enterprise. For simplicity, the indicators can be combined into five groups:

1. Material costs.
2. Deductions for social needs.
3. Labor costs.
4. Depreciationfixed assets.
5. Other expenses.

But they are all produced for profit only. It is the final financial result. And it really depends on the volume. But do not forget about the quality aspect and the level of applied prices. Analysis of the results of the financial and economic activities of the enterprise allows you to assess how good the policy was chosen. But at the same time, it is necessary to look at small nuances - for example, to separate revenue from sales. That is, products can be shipped today, and payment will come in a week. If everything is within the same period under consideration (for example, a month), then this can be ignored. But if shipped in March, and payment in April? In this case, you need to tighten up a little.

Separate nuances about cost, profitability and costs

When the analysis of the financial results of the main activities of the enterprise, these two points are among the most important. And at the same time they are very unstable. What does it mean? Here, for example, the revenue received has a significant impact on the cost price. You should also remember about the costs, because from this point of view they can be variable and constant. To better prepare the data, it is recommended to organize management accounting, in which they will be highlighted.

The advantage of this approach is high integration, opportunities for analysis and decision-making. And as a final result - you can quickly and flexibly respond to allemerging challenges. After all, management is interested in not leaving the market in competition and getting the maximum profit. And this business is profitability. Everything is simple with her - the higher her score, the better. The question is how to achieve it. A whole combination of factors affects its level and dynamics:

1. The level of organization of management and production.
2. Structure of capital and sources of its receipt.
3. The degree of resource utilization in manufacturing processes.
4. Quality, structure and volume of the product being created.
5. Product cost and production costs.
6. Profit by activity.

Remember, fixed and variable costs were mentioned earlier, although they were not given due attention? It's time to fix it. Fixed costs include those whose value does not change with fluctuations in quantitative indicators during the sale of products. An example would be:

1. Depreciation of fixed assets.
2. Depreciation of intangible assets.
3. Rent.
4. Capital expenditures.
5. Depreciation of fragile and low-value items, as well as the cost of maintaining premises and buildings.
6. Training costs.

Variable costs vary with revenue. Examples:

1. Transportation charges.
2. Purchase of raw materials.
3. Wages.
4. Electricity, gas and fuel.
5. Tara and packaging.
6. Deductions to funds.

How to increase profits with reserves?

Analysis of the financial and economic performance of the enterprise should ensure the subsequent growth of turnover and profitability. One of the most effective ways to achieve this position is through reserves. How to achieve this? There are three main directions:

1. Increased sales volume.
2. Price increase.
3. Reducing the cost of manufactured products.

At the same time, there are the following options to increase prices:

1. Finding a better market.
2. Implementation in optimal timing.
3. Improve the quality of manufactured products.

These are the most optimal general options. Specifically, it is necessary to choose depending on what type of marketable product is offered. But you should carefully analyze the situation so as not to lose what you already have, and at the same time increase profits. Although, on the other hand, risk is an obligatory companion of entrepreneurial activity. Although in the case of reserves it is better not to go too far. It must be remembered that destroying is not building. And years of successful development and operation can go to waste if you make a critical mistake.

Conclusion

Analyzing the financial performance of an enterprise is not an easy task. It requires extensive knowledge in economic theory, econometrics, mathematics and a number of other disciplines. Although it is not so difficult to calculate by formulas. But to correctly select and structure the data -this is already a problem. The price of a mistake in this case can rise to the bankruptcy of the enterprise. This should always be remembered by both analysts and senior management, who make decisions regarding the development of the enterprise.

In the right hands and with a smart head, it significantly increases the survival of the enterprise in a competitive environment, turning into a reliable foundation for future years of development and prosperity of the enterprise. Fortunately, there are quite a few specialists in this area, so you can also find a skilled person in whose hands the work will be argued.