Posted by Cedric Joshua Martinez
Mar 09, 2016
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The reporting period for businesses in the US might not yet be near, but this surely is not an excuse to lie low on your efforts to keep your business financial documents on track. Anyone who has experienced the tedious tasks of going through a complex set of books knows that keeping financial statements in order - way before the deadline - is always the best way to go. On that note, today just might be the best time to rediscover the fundamentals of financial statement analysis.
Financial Statement Analysis Defined
In its simplest term, the strategic way of analyzing your financial statements is defined as a business accounting process that primarily involves the identification of key trends and ratios used in a company’s financial statement. In most cases, the identified trends and ratios are directly used across a series of reporting periods.
Why analyze at all?
On one hand, it may seem that the complexity of analyzing your consolidated financial statements poses an extensive reach of inconvenience - especially as it would likely take up too much time. But as most accountants and business advisers would tell you, such is not the case. Despite the time-consuming tasks of financial statement analyses, determining pertinent trends and rations are extremely significant in helping you as a business owner to make sound and profitable business decisions based on the outcomes of the analyses. Moreover, such analyses also have an impact in making potential investors turn a ‘maybe’ into a ‘yes’.
Who needs it most?
With the basics of company financial analysis out of the way, the next thing to consider is whether the meticulous task of analyzing financial statements is indeed for you. Here’s a list of those who will greatly benefit from financial statement analysis:
Creditors
Before your business hands over some funds to another enterprise, it is important to be certain that the other party is capable of returning the borrowed cash. Financial statements analysis is one of the best ways to know for sure.
Investors
Money matters are always a big deal, especially for potential investors. If you are eyeing a potential investment agreement with another entity, proving the worth of your business can help your investor reach an affirmative decision. Again, this is best done through financial data analysis.
Authorities
The Securities and Exchange Commission has a keen interest on your company’s identified key trends and ratios. To streamline the availability and access of these information, frequent and regular financial statement analyses are required.
Managers
Business owners who are struggling with important business decisions can easily tread the right track if pertinent facts and figures are at hand. Also, it assures them of the transparency of their financial statements. The key trends and ratios from financial statement analyses play a major role in both cases.
Seeing that there is nothing like a sound set of key trends and ratios to keep your business moving in the right direction, why else would you not seek professional services for your business financial statement analysis requirements?
There are fly-by-night companies that offer measly financial statement analysis services and there are providers of professional finance and accounting that hit your business financial needs bull’s eye. Interested on the latter? Get in touch with our qualified financial advisers.
