Learn how to perform a financial analysis in 3 steps
Conducting an adequate financial analysis is crucial for any company.
In fact, if you have a company and want to succeed, it is necessary to know how money is being spent and invested and how you can improve your finances.
In addition, financial analysis allows you as a business leader to know what decisions to make and ensure that these are based on reality and relevance.
Unfortunately, nowadays many companies are not making the most of their financial data because they do not understand its importance.
Therefore, today I present the three steps to carry out an efficient financial analysis, based on what I have learned throughout my work experience and performance.
Step 1: Set the objectives of the financial analysis
The first thing you should do is establish the objectives you want to achieve in the financial analysis.
These objectives can vary, but ideally they should relate to the company's goals.
For example, if the company wishes to increase its profitability, then the main objective of the financial analysis should be to identify the factors that influence profitability and how you can improve it.
On the other hand, if the company wishes to reduce costs, the objective would be to identify expenses and look for ways to reduce them.
By setting and delimiting the objectives, you can focus the analysis on the key points and obtain more precise results.
In addition, having a clear vision of the objectives will also allow you to focus on what really matters and avoid getting distracted by other irrelevant data.
Step 2: Obtain the necessary financial information
Once you have set the objectives, the next step is to obtain the necessary financial information.
This information can come from different sources, including accounting, financial reports, and statements.
It is important that the information is truthful and up-to-date.
If the information is outdated or inaccurate, the financial analysis will not be accurate or precise.
It is also important to pay attention to the key data taken for the analysis.
Key data may vary depending on the objectives, but usually include:
– Income and expenses
– Gains and losses
– Assets and liabilities
– Profitability
– Cash flow
Once you have the right information, you must organize it and analyze the data coherently and logically.
Step 3: Make decisions based on the results
Finally, once you have set the objectives, obtained the necessary financial information, and analyzed the data, you can make decisions based on the results obtained.
It is important to emphasize that financial analysis is not a one-time task.
It is important to regularly monitor the financial situation of the company to identify opportunities and risks and adjust the strategy according to the results.
Conclusion
Ultimately, for every company, the importance of financial analysis is immense and cannot be overlooked.
These three steps that I have shared with you today in a simple and digestible way can help you identify your financial situation and even improve it, so you can make better decisions.
It is valuable to note that if a company does not have the necessary resources to carry out an adequate financial analysis, it is best to seek help from expert financial consultants who can guide in the processes and make recommendations for the company's growth and financial improvement.
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