All of these combine to explain the viability of your organization in black and white. So, what exactly is a financial analysis report and how do you generate one?
Below are seven key parts to the analysis and what goes into each. Similar to writing a business plan , a financial analysis is a way for investors or those new to your company to understand who you are and what you do.
In a financial analysis, the investment thesis covers the positive and negatives of the company as an investment property. Fundamental analyses typically include company-specific factors e.
This section should list any and all resources used to generate the findings in the report. Similar to a term paper, all your sources should be mentioned, including your own documents e.
Any external sources, such as industry trade journals or articles, should also be cited. How you collected the data in the report is also important. This is a time-consuming but necessary task that helps anyone reading the document to fully understand all of the assumptions upon which the data is based. These can be positive or negative events, but they should be noted so that discrepancies are explained up front and, hopefully, provide very little impact to the report in general.
This is really the crux of the financial statement. Valuation can be arrived at using one of three methods:. Any and all factors that could be classified as a risk should be included in this section. If you analyze a specific company suggested by the teacher, you can find its financial statements in the Internet or in the definite books on business and accounting.
If you are ambitious to research a completely different firm, you can receive these documents directly from its owner. Of course, this job is often complicated.
Nevertheless, if you have had your practice at the chosen company, you can receive at least several financial statements devoted to the certain period in the past. There is hardly a boss who will supply you with the relevant information of this kind. Bear in mind that a financial statement is a complex document that embraces numerous minor documents, like a balance sheet, an income statement, an equity statement and a cash flow statement.
You will have to look through and analyze every document in order to complete a full financial analysis paper. This balance is paramount for the objective survey of the specific firm.
You should know about its assets and debts. Moreover, you ought to examine the shareholder equity. It is smart to pay attention to any shifts in this balance in order to find the weak sides of the company. It is a bad signal when a company loses its assets and increases its debt without any objective reasons. A common successful company has a tendency of the gradual increase of its income indicator. Such firms are unreliable and require reorganization and alteration of their business strategy.
A report should start with a description of the company in order to help investors understand the business, its industry, its motivation and any edge it might have over its competitors. These factors can prove invaluable in helping to explain why a company might be a profitable investment or not. More valuable detail can be obtained from industry trade journals, reports from key rivals and other analyst reports. To also capture key fundamentals to describe a company, look to Michael Porter.
Specifically, the factors include the threat for new entrants to enter the market, the threat for substitute products or services, the extent to which suppliers are able to influence the company and the intensity of rivalry among existing competitors.
The motivation for a bullish or bearish stance on a company goes into this section. It can come at the top of a report and include parts of a company overview, but regardless of its position, it should cover the key investment positives and negatives. No detail is too small in this section; it can also cover efficiency ratios like the primary components in the cash conversion cycle , turnover ratios and a detailed breakdown of return on equity components, such as the DuPont identity , which will break ROE into three to five different metrics.
No analyst has a crystal ball, but the best ones are able to accurately extrapolate past trends into the future, or decide which factors are the most important in defining success for a company going forward. The most important part of any financial analysis is to come to an independent value for the stock and compare this to the market price.
There are three primary valuation techniques:.
No company exists in a vacuum, so a financial analysis paper must include an examination of the company's industry. The report will include comparisons between the company's financial health and that of its competitors, and it will report the company's market share and prominence in the industry.
Learn Key Tips On How To Write Financial Analysis Paper. Writing a detailed financial analysis of a company is very crucial since it is one of the tools used in determining whether to invest in the business. Note that there is no particular technique of writing a financial analysis, and the presentation styles will always differ. However, it is good to .
Financial Statement Analysis Paper Example 1: Dell Computer Dell Inc. Current Year Prior Year 3 Years Ago $ Percent $ Percent $ Percent Income Statement Revenue 61, % 52, % 61, %. From an investor's perspective financial statement analysis aims at predicting the future profitability and viability of a company, while from the management's point of view the ratio analysis is important as it helps anticipate the future conditions in which the firm should expect to operate and facilitates strategic decision making (Brigham and Houston .
Financial analysis reports contain a wealth of valuable information about a company. Below is an overview of the major sections to consider when writing a financial analysis . FINANCIAL ANALYSIS PROJECT – FINAL PAPER 15 From the analysis it is evident that the gross profit ratio is good, where as operating ratio is around optimum level to the industry standards. As a whole, the liquidity position of the company is good.