Financial Analysis

Financial analysis used to assess business continuity, stability, profitability of a business, a sub project
or business.

Financial analysis performed by a professional who provides a report in the form of ratios that use the information as presented in the financial statements. This report is usually presented to top management of a business as a reference to taking a company policy.

Based on the results of this analysis, the management may decide a variety of management decisions such as:

* Continuing or not to continue operating a business or part of an effort.
* To manufacture or purchase of raw materials in the production process
* To purchase or lease production machinery
* Doing the issuance of stock or are negotiating to obtain a bank loan to increase working capital the company.
* Various other decisions that allow management to do the right choice for a variety of alternatives in managing the company.

The purpose of financial analysis

Financial analysis is often considered an effort by:

1. Profitability is the company's ability to generate a profit and sustain growth for both short and long term. Corporate profitability is usually seen from the company income statement (income statement) that shows the performance results the company reports.
2. Solvency is the company's ability to meet all its obligations, as measured by a comparison of all liabilities of all assets and the ratio of all liabilities to equity
3. Liquidity is the company's ability to meet obligations smoothness measured by using a comparison between the current assets to current liabilities.
4. Stability is the company's ability to maintain its business in the long term without having to suffer losses. To assess the stability of the company to use an income statement and balance sheet (balance sheet) companies and various financial indicators and other non-financial.


Method

Financial analysis often uses financial ratios of solvency, profitability, business growth.

* Performance of the past for a certain period eg during 5 years
* Performance future: using past performance figures and mathematical and statistical techniques, including the present value and future value. This calculation method is the cause of the financial analysis error statistics of the past which can lead to lower future predictions.
* Compare the performance of comparing performance between companies in similar industries