Analysis of the financial condition of an enterprise is a necessary procedure for maintaining the financial security of an enterprise

A qualitatively conducted analysis of the financial and economic aspects of the functioning of an enterprise helps to make an assessment of the work done and correctly predict the changes in order to obtain the greatest profit. To conduct such a procedure, as an analysis of the financial state of the enterprise, the financial manager of the enterprise is involved or, more objectively, a qualified specialist is employed by the relevant company. In order to analyze the financial condition of the enterprise fully, the financial manager must use all the accounting and statistical reporting of the company at the current time and for the previous periods.

In the analysis it is important to take into account absolute profit indicators, relative profit indicators, financial stability and liquidity of the balance sheet, and the effectiveness of using the attracted capital (if any). Deep analysis of the financial and economic activities of the enterprise takes place in several stages. First, the existing reports are read, then deeper professional types of analytical work are carried out, they include the vertical analysis method, the trend analysis method, and finally the calculation of so-called financial-factor analytics. During the reading of reports, the company's performance indicators are studied, the analysis of the financial condition of the enterprise, the property status, the use of long-term and short-term investments, the sources of capital formation of the enterprise, relations with buyers and suppliers, financial and credit enterprises are performed, and the income from the activities and profits of the current year is estimated. Horizontal analysis of the financial condition of the enterprise reflects the trend of changes in the reporting part of the report as compared to the previous quarter, half year, month. Vertical analysis refers to the estimation of the relative weight of certain individual indicators, for example, accounts receivable, in general activity. Conducting a trend analysis allows you to identify the main ways of development of the enterprise in terms of reporting. A more accurate analysis of the financial condition is obtained by comparing the indicators for several years of activity.

Financial ratios are of particular importance for a financial manager, which are the basis for analyzing the activities of an enterprise. The coefficients show the financial proportions and are based on data from a certain base: generally accepted standards, average indices in a certain industry, the performance of an enterprise of previous years, data on the activities of other enterprises, and other performance indicators of the company. Calculations on the coefficients are not particularly complicated, but they make it possible to draw more precise conclusions and make more feasible and optimally probable forecasts, to identify the weakest places in the enterprise's activities. The analysis of the financial and economic activities of an enterprise conducted by qualified managers is not only a document for the manager, who, based on the results, will be able to evaluate the work of the company and outline measures to improve it. Such a document can be drawn up for external users - banks, which, on the basis of its indicators, decide on the issue of loans, participants in the stock market that determine the value of the shares of the enterprise or investors who decide on the feasibility of investment.

The manager who conducts the analysis must have the skills and experience in this type of activity, as he is responsible to the head of the company for the proposed recommendations for improving the work, the accuracy of the data that constitute the "financial image" of the enterprise.