All companies need to analyze their financial status periodically by analyzing important
financial data of their company. The financial officer of the firm interprets the
financial statements of the company and creates a report for the management after
conducting a financial analysis of these statements. The report is then used by
the top management for decision making.
Financial statement analysis involves analyzing the firm’s financial statements
to extract information that can facilitate decision-making. For example, an analysis
of the financial statement can reveal whether the firm will be able to meet its
long-term debt commitment, whether the firm is financially distressed, whether the
company is using its physical assets efficiently, whether the firm has an optimal
financing mix, whether the firm is generating adequate return for its shareholders,
whether the firm can sustain its competitive advantage etc.
The performance of a firm can be assessed by computing key ratios and analyzing
(a) How is the firm performing relative to the industry
?
(b) How is the firm performing relative to the leading
firms in their industry ?
(c) How does the current year performance compare to
the previous year(s) ?
(d) What are the variables driving the key ratios ?
(e) What are the linkages among the ratios ?
(f) What do the ratios reveal about the future prospects
of the firm for various stakeholders such as shareholders, bondholders, employees,
customers etc. ?
Financial analysis is performed by both internal management and external groups.
Firms would perform such an analysis in order to evaluate their overall current
performance, identify problem/opportunity areas, develop budgets and implement strategies
for the future. External groups (such as investors, regulators, lenders, suppliers,
customers) also perform financial analysis in deciding whether to invest in a particular
firm, whether to extend credit etc.
Financial analysis is one of the most key performance indicators for any business.
By conducting financial analysis of a company, one can assess the financial state
of the company and its ability to generate revenue. Solvency of the firm can be
judged with financial statements indicating the company's ability to pay its creditors
in the short-term and the long-term. A financial analysis report of the company
can also judge the company's liquidity with the company's financial ability to maintain
positive cash flows. Evaluation of a company's stability is often carried out with
the aid of the many financial statements and non-financial indicators.
Analysis of Financial Statement
While conducting the analysis of financial statement(s) of a company, one will need
to consider the past performance of the company. The analysis of financial statements
of the firm is most often done with the aid of mathematical and statistical tools;
the future performance of the company can be extrapolated. Comparative and financial
ratio analysis is the most common method of vertical and horizontal financial analysis;
many businesses use to evaluate their financial state and performance. Financial
analysis gives a holistic picture to the top management on important decisions regarding
financial investments, key production decisions etc.
Business Financial Analysis
Business financial analysis is the analysis of the company's business with other
similar businesses. This will help the company analyze the financial statements
in order to get a peer group assessment of the company's financial standing. A trend
analysis is also done to assess the company's progress in the business over the
years. This financial analysis is conducted over a period of five years to be able
to predict accurately the future trend of the business. Business financial analysis
can be done for each of the businesses of a large company. Each of the businesses
can compare the level of contribution they have in the company's overall profits.
The top management usually assesses this in order to evaluate profitable and non-profitable
businesses through the business financial analysis report.
Balance Sheet Ratios
Balance sheet ratios help financial officer(s) of a company conduct financial analysis
based on the annual balance sheet of the company. Balance sheet ratios are based
on three aspects of the balance sheet; they are assets, liquidity and equity.
Outsourcing Financial Analysis Services to India
India is today the preferred destination for FAO (Finance and Accounts Outsourcing).
The success of India’s outsourcing firms has ensured that more than 80 per cent
of the Fortune 500 companies are offshoring or evaluating the outsourcing of their
non-strategic processes now.
Beyond the advantage of lower costs, lies India’s talent pool of qualified Financial
Analysts and Chartered Accountants with domain expertise in every sphere of the
finance arena.
One of these areas is financial analysis - the integration and analysis of information
stored in financial systems and other critical data sources across the organization
make up Financial Analysis Services from Amxthyst.
Financial Analysis Services offered by Amxthyst
• Financial Research & Analysis
• Corporate financial statements
• Analysis of financial statements- monthly, quarterly,
and annual management reports
• Analysis of Portfolio structures
• Analysis of Prospectus, Offer Documents
• Ad-hoc reports, industry reports (fact books, competitor
analysis)
• Creation and maintenance of databases and libraries
• Financial ratio analysis, break-even analysis, NPV
and IRR analysis
• Board of Directors and audit committee presentations
on financial results
Benefits of outsourcing Financial Analysis Services
Information for action
Outsourcing financial analysis services gives management access to faster and more
accurate interpretation of financial data. This enhances decision-making ability
so that proactive action can be taken to improve the financial health of the organization.
Better technology
Access to improved technology means that data can be used on a regular basis to
improve service levels in the company.
Business transformation
Cost savings, although substantial (30-50%) are no longer the only reason for outsourcing
financial analysis, which can help a business become more competitive by providing
better service and quality, continuously innovating in products and processes, thus
increasing value to stakeholders.
Transparency and regulatory compliance
CFAs the world over are turning to financial services outsourcing to achieve improved
financial reporting and regulatory compliance with laws.
Knowledge management
in the financial services industry contributes to the bottomline of the company.
People, processes and technology – for best-of-breed financial analysis
Amxthyst has a team of qualified Chartered Accountants, (certified public accountants)
statisticians with doctoral degrees and people with MBA (Finance) from reputed institutions.
They stay abreast of global trends with online journals and through link-ups with
reputed CFAs abroad. They have valuable industry experience which can be effectively
tapped to determine the performance and fiscal accountability of an organization.
They use techniques for financial analysis services such as Ratio Analysis, ROI,
Break-even Analysis, Cost/Benefit Analysis, Cash-flow and Funds-flow statements
to arrive at an accurate picture of a company’s financial health.
Technical assistance is provided by our team of skilled and competent technical
analysts and data entry operators. Amxthyst has the state-of-the-art technology
and the talent to scale up operations swiftly. We can create scalable databases,
enabling our customers to benefit from our skilled financial analysis while maintaining
international standards of security and privacy.
