What are the different types of financial decision -making analysis?
Financial decision -making analysis is mainly used to assess the financial status of the company. Financial decision -making analysis can be either internal or external. It is internal if the analysis comes from society itself for its own purposes. The analysis is external in terms of using other entities outside society. Financial decision -making analysis can also be classified to vertical and horizontal analysis.
The horizontal analysis of the financial decision is an internally generated process that includes the evaluation of past financial transactions for a certain period of time. These include factors such as balance sheets, profit and loss statements, income statements, cash flow analysis and cash flow projections. Data from the statement of cash flows and income statements can be analyzed to provide an accurate procedure of the amount of sales that the company has to earn before earning enough money to settle their financial obligations to their fixed and variable assets.
Analysis helps spoliMinging project, how much sales will take to pay off their debts, pay their accounts and earn enough money to cover expenditure on items such as transport and other services. A consistent result in several periods of study helps the company to understand the financial trend of the organization. In the same sense, vertical analysis is also a study of a financial trend in society. The difference between the horizontal analysis of financial decision -making and the vertical analysis is in time. Vertical analysis is based only on the outcome of the financial statements of the selected period.
Financial decision analysis can be carried out by people who are not related to the company. These people may include potential investors, potential creditors, shareholders, suppliers and government agencies such as tax authorities. The purpose of such an analysis depends on the interest of the more. A potential investor can simply wish to find out financial trends in the company to see if it is a good investment. The creditor may wish to find out the financial history of the companyNatost before he decides to borrow money. Most external parties must largely depend on factors, such as published financial statements and other statements that the company can detect. On the other hand, internal analysis is carried out by the company itself with the advantage of all records and other materials necessary to perform accurate financial decision -making analysis.