What is Financial Analysis?

Financial analysis is based on accounting and statement data and other relevant information. It uses a series of specialized analysis techniques and methods to analyze the profitability of economic organizations such as enterprises in the past and present related financing activities, investment activities, operating activities, and distribution activities. Economic management activities that analyze and evaluate operating capacity, debt-recovery capacity, and growth capacity. It is an economic application discipline that provides accurate information or basis for investors, creditors, operators and other organizations or individuals concerned about the enterprise to understand the company's past, evaluate the current status of the enterprise, and predict the future of the company to make the right decision.

financial analysis

(Economics subject term)

Methods of financial analysis:

(A) comparative analysis

The comparative analysis method is a method of explaining the changes in the financial status or operating results of an enterprise by comparing the same indicators in two or more consecutive financial reports to determine the direction, amount, and extent of changes.

The specific application of the comparative analysis method mainly includes the comparison of important financial indicators, the comparison of accounting statements and the comparison of the composition of accounting statement items.

1. The comparison of financial indicators in different periods mainly has the following two methods:

(1) The fixed-base dynamic ratio is a dynamic ratio calculated with the amount in a certain period as a fixed amount in the base period.

(2) Momentum ratio is a dynamic ratio calculated by comparing the data of each analysis period with the data of the previous period.

2. Comparison of accounting statements;

3. Comparison of the composition of accounting statement items

A certain overall indicator in the accounting statement is taken as 100%, and then the percentage of each constituent item in the overall indicator is calculated, so as to compare the increase and decrease of the percentage of each item, so as to determine the trend of changes in financial activities.

When using the comparative analysis method, the following issues should be noted:

(1) The caliber of the indicators for each period for comparison must be consistent;

(2) The impact of occasional projects should be eliminated so that the data used in the analysis can reflect the normal production and operation status;

(3) The principle of exception should be used to make a key analysis of an indicator that has changed significantly.

(B) ratio analysis method

The ratio analysis method is a method to determine the degree of change in financial activities by calculating various ratio indicators. There are three types of ratio indicators: composition ratio, efficiency ratio, and related ratio.

1. Composition ratio

The composition ratio, also called the structure ratio, is the percentage of the value of each component of a financial indicator to the total value, reflecting the relationship between the part and the total.

2. Efficiency ratio

Efficiency ratio is the ratio of expense to income in a financial activity, reflecting the relationship between input and output.

3.Related ratio

Relevant ratio is the ratio obtained by comparing a project with related but different projects, and reflects the correlation between related economic activities.

For example, comparing current assets with current liabilities, and calculating the current ratio, you can judge the short-term solvency of an enterprise.

When using the ratio analysis method, the following points should be noted:

(1) Relevance of comparative projects;

(2) the consistency of the contrast caliber;

(3) The scientific nature of the measurement standards.

(Three) factor analysis

The factor analysis method is a method of quantitatively determining the influence direction and degree of each factor on the analysis index according to the relationship between the analysis index and its influencing factors.

There are two kinds of factor analysis methods: serial substitution method and balance analysis method.

1. Serial replacement method

2.Gap analysis method

When using the factor analysis method, the following issues must be noted:

(1) the relevance of factor decomposition;

(2) the order of factor substitution;

(3) seriality of sequential substitution;

(4) Hypothesis of calculation results.

United States

1. Capital operation analysis: According to the company's business strategy and

I. Liquidity ratio

1,

Analysis of critical value indicators

Enterprise performance evaluation is the production and operation of the company's financial benefits. Comprehensive evaluation of multi-factors such as debt repayment ability and development ability. Therefore, when using the evaluation results for specific projects or selecting some indicators for the evaluation of specific targets (such as the evaluation of credit and proposed investment projects), it is also necessary to carry out Research and analysis of financial indicators and horizontal and vertical comparison. For example, according to the relevant provisions of the enterprise performance evaluation: when the net asset is negative, the two indicators of the return on net assets and the capital accumulation rate and the initial evaluation score are calculated as 0 points; the asset preservation and appreciation rate, the operating loss accountability ratio and The individual correction factors for the three-year average capital growth index are calculated as 1. In this way, due to the influence of coefficients and other indicator values, the enterprise performance evaluation indicator value may still be high. If this evaluation result is applied to the evaluation of credit and enterprises to be invested, it is obviously not reasonable, because the net assets appear negative, that is, the assets are insolvent. According to the relevant provisions of corporate bankruptcy, such enterprises may be bankrupted and liquidated at any time. .

This example, on the one hand, shows that corporate performance evaluation is a deepening and sublimation of corporate financial analysis. Although it makes up for the lack of comprehensive conclusions based on pure financial indicators, it can not be seen from the "label" of corporate performance evaluation. Specific problems and potential problems and the crux of the problem. Therefore, when applying the evaluation results, it is necessary to conduct an in-depth analysis of the company's financial indicators; on the other hand, it also shows that when conducting in-depth analysis of financial indicators, special attention must be paid to some Analysis of financial indicators at threshold.

In addition, the critical values of non-financial and non-metric indicators should also be noted. Common non-financial indicators include production safety indicators and environmental protection indicators. The minimum requirement set by the state is its critical value. There are various definition methods for non-measurement indicators. The eight non-measurement evaluation indicators for enterprise performance evaluation are a relatively comprehensive non-measurement indicator system. The standard value of the difference (E) level of each indicator is its critical value. For example, the criterion of the poor (E) level of the "basic quality of the leadership team" is "the company's leadership team is not united, the main leadership is ineffective, or power is used for personal gain, there are many decision-making mistakes, the company's effectiveness is declining, and employees have a lot of complaints." .

When the basic quality of the enterprise leadership team has the basic characteristics of poor (E) grade, it should be further analyzed.

Analysis of indicator calculation data sources

The performance evaluation of an enterprise takes financial indicators as the main content, and the return on net assets (that is, the rate of return on investment) as the core; the evaluation of the performance of the company's operating efficiency and the performance of the operator, and the level of the financial index directly affects the evaluation result. Bad. The data used to calculate the value of the financial indicators comes from the accounting statements, and the accounting statements are prepared based on the accounting book data confirmed according to the accrual system and historical cost principles. Therefore, when applying enterprise performance evaluation results and evaluation indicators, we should pay attention to the following issues:

1. Old enterprises that have not carried out asset assessment and adjustment. The balance sheet items, especially asset items, and the calculated index values of such enterprises are far from those of new enterprises and enterprises that have been assessed and adjusted. Therefore, the calculation of financial indicators of such enterprises should be further carried out. Analysis.

2. Accounting statement data that has not been adjusted by independent audit institutions. Because such enterprises have not been adjusted in accordance with the country's unified accounting policy and accounting system, the data of their accounting subjects and corresponding accounting subjects lack comparability, and the index values calculated from this lack comparability.

3. Virtual assets items such as pending expenses, net current losses of pending assets, net losses of pending fixed assets, start-up fees, long-term deferred expenses and high-aging accounts receivable, inventory depreciation and backlog losses, investment losses, fixed Loss of assets, etc. may generate potential asset items. For these two types of asset items, they are generally referred to as non-performing assets. If the total amount of non-performing assets is close to or exceeds the net assets, it not only indicates that the company's ability to continue operating may be problematic, but also indicates that the company has formed an "asset bubble" due to artificially exaggerated profits in the past few years; The increase in the total profit and the increase range indicate that the company's current profit statement data has "water".

4. Related party transactions. Through the analysis of the operating income and total profit from the affiliated enterprises, determine the extent to which the profitability of the enterprise depends on the affiliated enterprises, determine whether the enterprise's profit base is solid, and whether the source of profits is stable. If the company's operating income and profits mainly come from affiliated companies, it should pay special attention to the pricing policies of affiliated transactions, and analyze whether the companies use the unequal exchange method to decorate accounting statements with affiliated transactions. If the total profit of the consolidated financial statements of the parent company is significantly lower than the total profit of the enterprise, it may mean that the parent company "packages" profits into the enterprise through related party transactions.

5. Non-main business profit. By analyzing the ratio of other business profits, investment income, subsidy income, and non-operating income to the total profit of the enterprise, the stability of the source of profit of the enterprise is analyzed and evaluated, especially for enterprises that carry out asset reorganization.

6. Cash flow. Use the comparative analysis of net cash flow from operating activities, net cash flow from investment activities, and net cash flow to determine the quality of the company's main business profit, investment income, and net profit. If the company's net cash flow is lower than profit for a long time , It will mean that the assets corresponding to the profits that have been recognized may be virtual assets that cannot be converted into cash flows.

Analysis of external matters

The non-metric evaluation index of enterprise performance evaluation is a very important content of the company's off-balance sheet matters. When applying, it should not only pay attention to analyze its impact on the enterprise, but also pay attention to the analysis of the following off-balance sheet major matters, as shown in the following table: ( slightly)

In addition, it should be noted that the essence of enterprise performance evaluation is the performance evaluation of state-owned capital, which mainly serves enterprise supervision. The management and financial supervision of state-owned capital, the assessment of the leadership team, and the distribution of income of operators reflect the functions of state owners. Marx once said: "There are two kinds of power before us, one is property power; the other is political power, that is, the power of the state." Two kinds of power are derived from two different functions, that is, the state's owner function and the social management function. Enterprise performance evaluation reflects this property right and the state's owner function. It is political power and the country's social management. Functions provide services and play a role through them. Therefore, the enterprise performance evaluation has better adaptation conditions and environment to the evaluation of holdings and wholly-owned subsidiaries, and it plays a greater role, and it has a worse evaluation of participation in investment and creditors' evaluation of debtors. Be smaller, pay attention to this.

Financial analysis and economic activity analysis

Financial analysis and

Subjects of financial analysis, including equity investors,

The object of financial analysis is the basic activities of the enterprise. Financial analysis is to obtain information from the report that meets the analysis purpose of the user of the report, recognize the characteristics of the company's activities, evaluate its performance, and discover its problems.

The basic activities of an enterprise are divided into three categories: financing activities, investment activities and business activities.

Fund-raising activities

The purpose of financial analysis is the ultimate goal of financial analysis. The ultimate goal of financial analysis is to provide a reliable basis for users of financial statements to make relevant decisions.

The purpose of financial analysis is restricted by the subject of financial analysis. The purpose of financial analysis is different for different subjects of financial analysis.

The general purpose of financial analysis can be summarized as: evaluating past operating performance, measuring current financial conditions, and predicting future development trends. According to the specific purpose of the analysis, financial analysis can be divided into

On the Application of Financial Analysis Indicators in Practical Work

Financial analysis is an important way to evaluate the operating conditions of enterprises. This catalog starts with the financial analysis indicators commonly used by enterprises, starting from

Effective financial analysis must include the following five interrelated steps: 1. Determine the economic characteristics of the specific industry (or industry) in which the company is located 2. Determine the strategy adopted by the company to enhance its competitive advantage 3. Correctly understand and purify the company's finances Statement 4. Use financial ratios and related indicators to assess corporate profitability and risks 5. Make relevant evaluations for management decisions

1. Determine the economic characteristics of the specific industry (or industry) in which the enterprise is located

Can financial analysis be completely resolved within the enterprise? It now looks problematic. Because the determination of the relationship between financial statements and the financial characteristics of enterprises cannot be separated from the analysis of industrial economic characteristics. In other words, the same financial statements are placed in enterprises in different industries, and the economic meaning and financial characteristics of the same are likely to be completely different. For example, the retail, steel, and real estate industries have very different financial ratios; for example, high-tech industries and traditional industries not only differ greatly in industrial economic characteristics, but also determine the factors that determine their competitive position. Not the same. In financial analysis, industrial economic characteristics are a very important basis for analysis. Only by understanding and determining the economic characteristics of a particular industry in which an enterprise is located, can it be possible to truly understand the economic significance of financial statements and to use financial analysis in management decision-making. effect. Lack of grasp of the economic characteristics of the industry in which it is located means that corporate financial analysts isolate themselves in a small circle and do not know the environment in which the enterprise is located, the prospects of industrial development and its impact, and its competitive position.

In actual work, there are many models that identify the economic characteristics of industries (or even enterprises). The most commonly used are the five-level economic attribute models, which include demand, supply, production, marketing, and finance. Among them, the demand attribute reflects the customer's sensitivity to the price of the product or service, and the industrial growth rate, sensitivity to the business cycle, and seasonal impact are all important factors in assessing demand. Supply attributes are the characteristics of a product or service in terms of its provision. In some industries, the products or services provided by many suppliers are very similar, while in other industries, there are only a very limited number of suppliers. People usually judge the supply by the difficulty of industry entry. As far as the production attributes are concerned, some enterprises are purely labor-intensive and some enterprises are capital-intensive. When analyzing the production attributes, the complexity of the manufacturing process is also An important criterion. The marketing attributes of industries involve consumers and distribution channels of products and services. Some industries are particularly strenuous in marketing, while others are much easier to market. The identification of financial attributes focuses on determining the level and type of liabilities that are compatible with the asset structure and product characteristics of the enterprise. For mature and profitable companies, their external debt is generally less than that of new companies. In addition, some industries generally cannot afford high levels of external debt due to short product life (such as personal computer manufacturing) or long-term development prospects (such as traditional steel manufacturing) and high risks.

Determining the economic characteristics of an industry is the first step in effective financial analysis. Through the determination of industrial economic characteristics, on the one hand, it provides a "navigation" for understanding the economic significance of financial statement data; on the other hand, it shortens the distance between financial ratios and related indicators and management decisions, thereby enabling information for financial analysis It becomes more meaningful for management decisions.

Determine the strategy adopted by the company to enhance its competitive advantage

Financial analysis is closely related to corporate strategy. If the industrial economy is characterized by the "navigation" of financial analysts understanding the economic significance of financial statement data, then corporate strategy is a specific guide for financial analysts to make relevant evaluations for management decisions in financial analysis. . Without corporate strategy, financial analysis will also lose its way, and financial analysis cannot really help management decisions make a scientific evaluation. Therefore, in an effective financial analysis model, immediately after the analysis of industrial economic characteristics is to determine the corporate strategy.

The reason why an enterprise has to establish its strategy and distinguish it from its competitors is entirely out of competition. Although the economic characteristics of an industry to some extent limit the flexibility of companies in formulating strategies to compete with other competitors in the same industry, many companies still create sustainable strategies by formulating strategies that are difficult to imitate and meet their specific requirements. Competitive Advantage. The main factors affecting corporate strategy include regional and industrial diversification, product and service characteristics, etc. Effective financial analysis should be based on an understanding of corporate strategy. In other words, you should understand how different companies respond positively to the factors that restrict development and how to maintain established strategies. In order to understand a company's strategy, financial analysts must not only take a serious look at its strategic plan, but also examine the specific actions of its implementation plan. In addition, it is essential to compare strategies among competing companies.

3. Correctly understand and purify the financial statements of enterprises

Although financial statements are used for management decisions, the purpose of financial statement preparation and financial analysis are, after all, very different. When financial analysts use financial statements, they also have a process of understanding and purifying the financial statements themselves. The so-called understanding means to understand the limitations of the financial statements. For example, the "profit management" performed by the enterprise management authority leads to the unreliability and unfairness of the financial statements. The so-called purification refers to the financial analysts' analysis of key items in the financial statements (Amount) to make it more reliable and fair.

In the process of purifying financial statements, financial analysts should pay attention to the following main aspects:

Do not repeat projects or extraordinary projects. The impact of these projects on profitability is temporary, and it should be considered for elimination before evaluating the true operating performance of the enterprise.

Research and development expenditure. The artificial arrangement of research and development, advertising, human resources training and other expenditures directly affects the profitability of enterprises in different accounting periods. It is necessary to be vigilant against the artificial arrangement of these expenditures in financial analysis. Similarly, when assessing a company's ongoing operating performance, adjustments to these artificial arrangements may be needed.

(3) "Profit Management". Numerous empirical studies show that there are a large number of profit management behaviors in enterprises. For example, in the selection of accounting methods, revenues are recognized in advance and deferred recognition costs; for example, in the application of accounting methods such as depreciation of fixed assets and progress of project completion, changes in accounting estimates, selection of accounting method application points, and transaction matters The point-in-time control process deliberately caters to the requirements of management authorities. These profit management may cause deviations and inaccuracies in corporate financial statements. Adjustments to them are essential in financial analysis. All these adjustments are a purification of financial statements for financial analysts.

Unfortunately, not all companies provide the information that financial analysts need to make adjustments to key items in the financial statements. In this case, financial analysts are clearly aware of the limitations of financial statements, and it is particularly important to fully consider this factor when interpreting the data of financial statements.

Fourth, use financial ratios and related indicators to assess the profitability and risk of enterprises

In financial analysis, people are more familiar with the calculation of financial ratios and related indicators, such as financial ratios such as current ratios, asset-liability ratios, and return on equity, as well as common ratio statements, related growth rates, and completion percentages. However, how to scientifically use these ratios and indicators to assess the profitability and risk of enterprises is not enough. There is no set of standard financial ratios and indicators. What kind of financial ratios and indicators are good? What financial ratios and indicators are poor? No one can tell. Textbooks say that a current ratio of 2 is normal, but an empirical study in the 1960s in the United States showed that the average current ratio of normal and continuing businesses is more than 3, while the average ratio of bankrupt companies is between 2 and 2.5. Obviously, there are no standards for financial ratios, and it only makes sense to link them to industry characteristics, corporate strategies, and even business cycles. Therefore, financial analysis is more than the analysis of financial accounting data. In financial analysis, the most important work should be to compare the financial data of an enterprise in the capital market environment such as industrial economy, securities, etc. to conduct multi-party comparisons, conduct in-depth analysis, and link the financial data with the corporate strategy to examine the existing Advantages and disadvantages, and scientifically assess the profitability and risk of the enterprise.

V. Making relevant evaluations for management decisions

The main purpose of financial analysis is to make relevant evaluations for management decisions. Management decision is a very broad concept. As far as financial analysis is concerned, management decision here mainly includes two categories: one is investment decision; the other is credit decision. In fact, these two kinds of decisions involve the issue of enterprise valuation, and to evaluate the value of the enterprise, we must return to the assessment of profitability and risk, and there must be no less profitability and risk.

There are many financial ratios and indicators. Which ratios are more relevant to management decisions? What ratios are more relevant to what decisions? To be honest, everyone has no idea. Textbooks say that current ratios and asset-liability ratios are useful for assessing a company's solvency, but the same empirical research in the United States shows that in assessing a company's solvency and bankruptcy risk, the return on assets is the most useful, followed by cash flow and total The debt ratio is finally the working capital to total debt ratio, the asset-liability ratio and the current ratio. Therefore, it is necessary to further study the relevance of financial ratios and related indicators to a specific management decision based on actual data.

In order to play the role of financial analysis in management decision-making, especially in enterprise valuation, the above five interrelated steps must be used. These five steps constitute an effective financial analysis model. Because it not only provides analysts with reasonable assumptions for the evaluation of management decisions (industrial economic characteristics, corporate strategies, and purified financial statements), but it also provides a logical and rational guide for how financial analysis itself can serve management decisions. .

There are many methods of financial analysis, mainly including

Avoid everything, talk in general

Financial analysis focuses on exposing problems, finding out reasons, and making recommendations. Therefore, the analysis content should highlight the focus of the current financial situation, grasp the essence of the problem, find out the main factors that affect the current indicator changes, and focus on the subjective and objective reasons for the changes in the indicators. Only in this way can we objectively and correctly evaluate and analyze the current financial situation of the enterprise, predict the development trend of the enterprise, and put forward rectification suggestions and measures in a targeted manner. That all-in-one, beard and eyebrow grabbing method is bound to be a "blind ride on a blind horse." The financial analysis written must either be painless and not itchy; or it can be a list of unaccountable current phenomena. Brief introduction to the situation, this kind of financial analysis is like tapping the potential of enterprises and plugging in, and perfect management has no value at all.

Avoid stereotypes, article formatting

The financial analysis of each period should have its own characteristics in both form and content. The emphasis on content, targeted, and flexible, novel, and diverse forms are the primary conditions for financial analysis to have strong vitality. The form is rigid, the same, and even swapping the index data of the previous period to engage in "fill-in-the-blank" eight-strand articles is a taboo for financial analysis.

Financial analysis is inherently professional, rigid in form and uniform in content, and its readability must be weakened. Financial analysis over time is bound to become dispensable. To revitalize the vitality and vitality of financial analysis, give full play to its role as a good staff for leadership decision-making, and to deliberately seek new and realistic financial analysis, both in content and form. From the title, you ca nt just stick to the single format of ××× unit ×× quarter (monthly) financial analysis. You can use some condensed dual sentences to summarize the current financial situation as the main title. You can also quote some appropriate To express the ancient poems, so that the theme is concise and clear. In terms of presentation, it can be described in terms of articles or interspersed with tables; it can be three-stage (profile, analysis, suggestions), and it can also be analyzed, suggested, and rectified; analysis can be compared vertically or horizontally . In short, financial analysis should not be confined to a model of "millionaires."

Bogey is just a list of numbers

To analyze the changes in indicators, it is inevitable that there is no comparison of numbers. However, if only the increase and decrease of the listed indicators is limited to the comparison of the numbers in the accounting statements, the numbers cannot be discussed in detail, and the reasons for the differences cannot be explained. Such financial analysis can only be a copy of the statement of changes in financial indicators or a checklist of financial indicators. This kind of empty and dull "analysis" will certainly not be welcome.

Only when "dead data" and "live conditions" are fully combined, there is "data" in the increase or decrease of indicators, indicating that there are "conditions" in the analysis, which are mutually confirmed and supplemented by each other, can financial analysis be convincing, credible, and logical. It is strong, and the operability is great.

Do nt try to stop, just stay on the surface

Often behind the good-looking indicators are individual serious shortcomings, loopholes, and hidden dangers, or certain valuable advantages that are diluted by certain disadvantages. This requires not to be confused by superficial phenomena, but also not to discuss matters; but to be good at in-depth investigation and research, to be good at capturing the inevitable inevitable development of things, to take an objective attitude, to overcome the "preconceived," and to occupy a large amount of detail The materials are scrutinized and verified repeatedly, and some rough processing and analysis are carried out to remove false and true processing and analysis, and then an objective and fair evaluation of the financial status of the enterprise will be obtained. For example, in terms of the comparative caliber of indicators, it is necessary to conduct in-depth investigation and verification to determine whether the conversion of their valuation, standards, time, composition, and content is comparable. There is no comparison between comparable indicators. It can only distort the true colors of things and it is astray.

Avoid good news and not worry

Reality, accuracy and objectivity are the lives of financial analysis. In order to diagnose and observe the economic operation of the enterprise and maintain the healthy operation of the enterprise, it is necessary to dare to expose shortcomings and exposure, so as not to jeopardize the "illness" and "remedy the situation". You ca nt run without grades and you ca nt talk about problems. Therefore, financial analysis must both affirm the achievements and expose the problems existing in the enterprise; it is necessary to explore the objective factors that affect the changes in the current financial situation, and also to focus on the subjective reasons that affect the changes in the current financial situation. Seek truth from facts and an objective and comprehensive analysis can only be targeted to avoid weaknesses, benefit and eliminate disadvantages, and strive to discover potential for enterprises, open source and reduce expenditure to serve the good.

Avoid reporting in a timely manner

Financial analysis is the most effective way for business leaders to understand the financial status of an enterprise, and it is also the most effective way for corporate finance personnel to participate in corporate management and make rational recommendations. Its guiding value lies in its timeliness. Corporate economic information is changing rapidly, and the financial analysis of changes over time will greatly reduce the effect of improving business management. The reporting of financial analysis should be synchronized with the reporting of accounting statements and be institutionalized.

Avoid professional flavors

Financial analysis mainly serves to improve the internal economic management of enterprises, improve the quality of economic operations, serve as a guide for leaders, and help the masses understand the family. Therefore, financial analysis should try to dilute the professional taste, use less professional terminology, use more common vocabulary, and refrain from pretending to be artificial and unpredictable; be straightforward, concise, and easy to understand.

Financial analysis must return to business analysis

Financial analysis must finally return to the analysis of business. Effective financial analysis should use financial data and financial analysis methods to confirm the business operation status. Do not use one financial indicator to evaluate another financial indicator. It is superficial. There is no substantial help in business operations. Therefore, finance personnel must cultivate their sensitivity and intuition to the business, and put analysis on the business.