How To Conduct A Detailed Analysis Of Any Company

Analysis part is essential as it gives a true picture of the concerned company to obtain strategic insight. Being a thorough evaluation of an organization, the company analysis provides insight to rationalize processes and make better revenue in all aspects. For that matter, it is always advised to go for a detailed research process which involves series of processes.

  • First of all, one should evaluate the type of analysis which would work best for your company depending upon the nature and size of the company. Research well about the methods for analysis. In order to perform a detailed analysis, it is important to understand the expected results out of it.
  • Next, the next step involves implementing the selected method for conducting the financial analysis. It is important for the analysts to include internal and external factors affecting the business from all the sources.
  • The next step involves supporting all the major findings by using statistical tools (hypothesis testing).
  • The final step involves reviewing and interpreting the results. The weaknesses are then attempted to be corrected. The company analysis is used in finding issues and determining the possible solutions for the same. It is conducted to provide a picture of the company at a particular time period, thus providing the best way of enhancing performance of a company.

TOOLS FOR DETAILED ANALYSIS OF ANY COMPANY:

SWOT ANALYSIS

This is by far the easiest and widely used tool to justify and finding out the strategic planning technique such as STRENGTH, WEAKNESS, OPPORTUNITY AND THREATS relating to any company.

STRENGTH

This includes the positive advantages does your organization have?

What do you do better than anyone else?

What unique or lowest-cost resources you have?

What do people in the market perceive your strengths?

What is your USP (Unique Selling Proposition) that makes you different from others)

WEAKNESSES

What could you improve to attract customers?

What should you avoid to maintain your goodwill in the market?

What people see your weaknesses?

What factors lose you sales data relating to products offered by you?

OPPORTUNITIES

What more you can do to achieve the planned growth?

What kind of products you should focus more on?

What good opportunities can you spot?

What interesting trends that are prevailing in the market are you aware of?

THREATS

What obstacles do you face?

What are your competitors focusing at?

Are quality standards or specifications can become threat?

Is changing technology threatening your position?

Do you have cash-flow problems?

BALANCED SCORE CARD

A balanced scorecard is a performance measurement tool used in strategic management to identify and improve various internal functions of a business and their resulting external outcomes. It is used to measure the factors and provide feedback to organizations in best possible way. It involves finding KPIs (Key Performance Indicators).

The four perspectives involved in Balanced Score Card are as follows:

  1. Learning and growth are analyzed through the training and knowledge resources. This explains how well information is captured and how effectively employees utilize the information to gain advantage over the industry.
  2. Business processes are evaluated by investigating how well products are manufactured. Operational management is analyzed to track any gaps, delays, waste.
  3. Customer perspectives are collected to measure customer satisfaction with quality, price, and availability of products or services. Customers provide feedback about their satisfaction with the products.
  4. Financial data such as sales, expenditures, and income are used to understand financial performance. This helps to analyze the financial ratios, cash flow statements etc.

PEST ANALYSIS

This analysis stands for Political, Economic, Sociological, and Technological is a method used to discover, evaluate, organize, and find out macro-economic factors that impacts the performance of any enterprise.  In the analysis part, business owners are provided with various external factors that directly and indirectly impact their businesses on long term basis. It is used to assess markets for a particular product or a business at a given time frame.

ANALYZING THE FINANCIAL RATIOS AND FINANCIAL STATEMENTS

 While performing a company financial analysis, these steps will provide a basic foundation for you to get started. Experienced managers, investors, and analysts collect information over time that allows them to perform financial analysis of companies more thoroughly.

Collect the company’s financial statements from the last three to five years from the annual report published in the website:

  • Balance Sheets
  • Cash Flow Statements
  • Income Statements
  • Shareholders equity statements

 Analyze these financial statements and scan them in order to look for movements in specific items from one year to the next. Analyze the Balance Sheet to see whether there exist large changes in the company’s assets, liabilities, or equity statements.  Also, Examine the Income Statement to identify trends prevailing in the business performance over time.

Along with that calculating financial ratios during previous financial years and comparing each one to get the comparative analysis. Review the market data of the business’s stock price, as well as the Price to Earnings (P/E) Ratio. Review the Dividend Payout. The Dividend Payout Ratio explains the percentage of a company’s net income given to shareholders by the name of dividends. At the end, evaluate all these parameters to interpret the results.

PREPARE FORECASTED FINANCIAL STATEMENTS.

Although it’s a challenging task, financial professionals must make reasonable assumptions and revelations about the future of the firm (and its industry) and determine how these assumptions will impact both the cash flows and the funding.. Also, using forecasting tools of Multi Criteria Decision Making tools can help to identify the future aspects quantitatively.

CONCLUSION

 Based on the above discussed points it is inferred to invest in companies that have bright prospects in the long-term by using forecasting technique.  The longevity of a company’s products is a factor when looking to invest in it. Investors mostly rely on their financial advisors or planners when it comes to investing and taking decision, for that matter detailed analysis holds utmost importance to fetch positive recommendations and results.

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