The control system at any enterprise should be holistic and cover all stages of the business process: from the initial stages of creating an enterprise, the initial acquisition of fixed assets and raw materials, to assessing the results of its activities. It is the consideration of the results of the enterprise for a specific period that allows us to assess the effectiveness of its work. Since all performance indicators of the company have a monetary dimension, the procedure for such an assessment is defined as an analysis of financial results. This procedure is performed at each enterprise, as a rule, at the end of the year, after the preparation of financial statements.
What is an analysis of the financial results of the company? In fact, this is a rather capacious computational work, the initial data for which are taken in the official financial statements of the company, and on the basis of which additional indicators are calculated, such as financial stability ratio, creditworthiness ratio and many others. Analysis of the financial results of the organization’s activities can be carried out not only by internal users of financial statements (managers and employees of the enterprise), but also external users — banks, potential investors, audit firms, and so on. The decision to provide the company with credit or investment funds, as well as the content of the audit conclusion, will depend on the results of this analysis.
When analyzing financial results, usually calculate the following indicators:
- Indicators of financial stability - determine the ability of the enterprise to provide its own needs with available funds;
- Indicators of profitability of the enterprise - show how profitable the use of assets of varying degrees of liquidity in the activities of the company;
- Indicators of business activity - relate to the speed of turnover of various kinds of assets. Business activity indicators show the duration of the production cycle of the enterprise, and the shorter it is, the more efficiently the firm’s work is built;
- Liquidity indicators - illustrate the relationship between different groups of assets, depending on their ability to quickly be turned into money;
- Solvency indicators - show how the company is able to meet its obligations to counterparties.
As a rule, the analysis of the financial results of the enterprise is made up of these five points. After all the calculations have been completed, it is time to characterize them - and it is the comments on the calculations that play a decisive role in the formation of opinions by users of this analysis and their adoption of certain decisions. As a rule, the best financial analysts are invited to conduct an analysis, since the fate of the company may depend on the correct interpretation of the results of the analysis.
It is also important to remember that for most domestic enterprises the analysis of financial results cannot always be considered reliable due to their so-called “black” accounting. The existence of a part of the enterprise that is not visible in the official statements may be the reason that the actual state of affairs may differ significantly from that described in the statement of financial performance. That is why in the CIS countries potential large investors and lenders rarely make their decisions based only on financial reporting data - often such decisions are made on the basis of personal agreements with the management of the recipient company. Only a radical reform of the existing economic system, especially in terms of taxation, can rectify this situation.
