What is meant by a financial analysis?
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inancial analysis consists of evaluating its financial situation at a specific time like
a financial diagnosis through doing a business.
It is based
on the various accounting statements of the company and on the financial and
economic data of its sector of activity. Thus, the financial analysis makes the
figures speak by carrying out various restatements on the accounting documents.
Objective of financial analysis
The objective
of any financial analysis is to be able to judge the financial health of a
company in an economic environment at a given time.
Unlike the
mandatory tax return each year, financial analysis does not follow any rule
imposed by law and is in no way mandatory, each financial analyst has their own
methods.
The
financial analysis makes use in particular of the tax return and the data
provided by the accounts of the company evaluated. Thus, the income statement,
the balance sheet, the details of fixed assets, depreciation and the
composition of the share capital, among others, are restated in order to show
the cash flow and the investment policy of the company.
The various
restatements carried out also make it possible to calculate ratios, such as the
debt ratio, the rate of return and the solvency ratio.
Financial
analysis creates tools intended to better visualize the financial situation of
a company at time T, in particular its economic performance, its development
prospects, its debt, its profitability and its financial stability.
All this
information resulting from the financial analysis is used at different levels
by:
> An investor
> A potential buyer
> Banks in the context of a loan
application
> Shareholders
> Competitors
> The various stakeholders of the
company: employees, suppliers and customers.
