Figure analysis basic techniques used in financial analysis

Posted on Mar 12, 2023 at 10:03 PM

Financial Analysis refers to statistical analyses of financial statements, activities, and data used in companies.

In particular, financial analysis has linked to the basic technical, accounting, and horizontal techniques to test the company's economic performance.

This article will discuss these techniques to help you analyse the numbers, make the right financial decisions, and manage investments and financing projects.

What does financial analysis offer for businesses?

The financial analysis gives accurate and accurate reports on the company's financial situation and performance.

Companies will manage funding projects because they have all data associated with the balance sheet, cash flows, and income statement.

By using advanced financial analysis, companies and businesses can create financial planning strategies and use financial forecasting techniques, which secure the company's success and purpose and make correct decisions in projects such as investment, finance, and extensive business activities.

6 Basic Techniques for Financial Analysis in Business:

Business owners' interest in the subject of financial analysis, which has grown in importance as accounting techniques evolve. as well as in the use of various financial analysis tools by accountants and analysts:

1- Trend Analysis:

Trend analysis is one of the essential techniques for studying financial statements or accounting analysis. 

To determine the economic trends expected in the future of the enterprise beneficiaries that will help it build a more prosperous financial future, based on studies of previous financial statements.

The financial analysis evaluates all accounting statements and their results within the present time. 

You are using trend analysis technology to help you expect future equity trends by taking advantage of the history of their movements to determine whether your project has the potential to succeed or fail.

2- Vertical analysis:

Vertical analysis technology is an effective method that gives the final analysis results. To determine the effectiveness of the performance of the company's financial situation and the lists and budgets in their final form by indicators and percentages indicating the value of the factors of each existing business.

Financial analysis is also one of the essential methods of indicating the percentages used in the distribution of financial information, which identifies all existing factors and impacts based on vertical analysis.

3- Descent Analysis:

Financial analysis of financial statements focuses on the study of ratios in discovering analytical indicators of the business activity and obtaining data showing the effectiveness of the company's financial performance to compare that information with competitors.

Since the concept of financial analysis is to assess existing projects and their performance. 

Ratio analysis is an essential means of assisting the financial analyst in detecting current resource effectiveness, return, and net income and comparing them with competing companies.

4- Cash Flow Analysis:

Cash flow analysis is also known as financial data analysis or analysis that shows the percentage of changes in cash flow from profit and loss, what causes those changes, and thus the best solutions to existing problems and the management of potential risks.

Cash flow analysis also gives companies helpful information such as how they use their cash flows, whether they enjoy them, and increase liquidity, return, and adequate financial performance.

5- Horizontal Analysis:

Horizontal analysis can clarify last year's or previous years' data showing all revenues, net income, costs, and sales.

Thus, the successful analyst is keen to get advanced accounting skills to understand horizontal analysis by attending practical practices through Accounting training courses in Kuala Lumpur.

6- Rate of Return Analysis:

In measuring the success rate of the organisation's investments, proper financial analysis management is necessary, as well as the rate of return on assets and profitability.

The accounting or profit rate analysis of the return on the financial statements shows the weaknesses and strengths of the investment projects. It determines the company's quality and whether it performs well.

In conclusion,

to analyse an organisation's balance sheet, you use types of financial analysis and performance standards. 

The effectiveness of accounting activities used in existing financing and investment projects. 

To study and analyse the financial stocks that management needs to make the right decisions, you need to know financial analysis, thereby increasing return and sales and earning the confidence of suppliers and investors for future success.