Financial analysis and reporting is a method of looking over a company’s financial records to make decisions about the future of the organization. This process consists of two main parts. In the analysis phase, the company’s records are examined to find trends in spending or leadership. In addition, the analyzer looks at similar businesses, both current and previous, to find likely correlations between the current company and others. The second phase, reporting, involves taking all the gathered information and condensing it down to just the relevant facts to make a proper decision.
There are two main types of financial analysis and reporting: general and specific. In a general report, the analysis looks at the entire business or area of the company. These reports are often complex, as the analyzed area is comprised of many smaller pieces. A specific report will look at a very small part of a larger organization. These types of reports are common when a company is considering the future of a specific project or small department.
In the first part of financial analysis and reporting, the analyzer will gather as much data on the project as possible. In many cases, the content of the data is unimportant; if it is about the area in question, the analyzer wants to see it. Using the information gathered, the analyzer looks for three things: viability, stability and profitability.
The viability portion of financial analysis and reporting relates to formation. This basically outlines the self-sufficiency of the area in question. If the area is only staying afloat because of a constant influx of money, material or talent from elsewhere, then it is not very self-sufficient. On the other hand, if the area does well on its own, then its self-sufficiency is high. The more viable the area is, the more likely it is to be successful over time.
The next part of financial analysis and reporting is stability. This is a measurement of how long a low-viability area will continue to function in its current state as well as the likelihood of its viability improving in time. With higher-viability areas, this attempts to forecast how well it can maintain its viability and the likelihood of its current situation changing.
The third part of a financial analysis and reporting project is profitability. This section looks at the current money going into and out of the observed area. The analyzer then decides how that money is being affected by the section’s viability and stability and whether changes to those areas will affect the future. This section relies heavily on market forecasts for the industry to find common trends.
Finally, the reporting part of the project brings all of this together into one final statement. In this final part, the analyzer looks at the information and makes a decision as to the future of the area. This statement is then turned over to the people in charge of the business, and they use it to assist in their decision making.
