In the words of experts offering financial statement analysis assignment help, there are six steps involved in developing an effective financial statement analysis. This requires a working knowledge of three critical areas:
- The financial statements’ structure
- Economic characteristics of the sector in which the firm operates, as well as the strategies used by the firm to differentiate itself from competitors.
It is critical for any financial professional to understand how to analyze financial statements effectively.
1. Determine the economic characteristics of the industry
Conduct a value chain analysis of the industry—that is, the chain of activities involved in the development, manufacturing, and distribution of the firm’s products and/or services. This step is frequently carried out using techniques such as Porter’s Five Forces analysis or economic attribute analysis. In case of any difficulties, you always have the option to hire a professional offering essay homework help.
2. Detect company strategies
Consider the nature of the firm’s products/services, including the product’s uniqueness, the level of profit margins, the development of brand loyalty, and cost control. Managerial Economics topics highlight that considerations involved in supply chain integration, geographic, and industry diversification.
3. Scrutinize the quality of the agency’s financial statements
While evaluating balance sheet accounts, consider issues such as recognition, valuation, and classification. The primary objective when evaluating the income statement is to accurately assess the quality of earnings as a comprehensive representation of the firm’s economic performance. The cash flow statement enables an examination of the firm’s liquidity position as a result of its operations, investments, and financial activities over time.
4. Assess current profitability and risk aspects:
This is the stage at which financial professionals can truly add value to the firm’s and financial statements’ evaluation. The most frequently used financial statement ratios for analysis are those related to liquidity, asset management, profitability, debt management/coverage, and risk/market valuation. In terms of profitability, two broad questions must be addressed: 1. How profitable are the firm’s operations in relation to its assets, regardless of how the firm finances those assets? and 2. How profitable is the firm in terms of equity shareholders?
5. Frame projected financial statements
Although this is frequently difficult, experts offering urgent essay writing services must make reasonable assumptions about the firm’s (and industry’s) future and determine how these assumptions will affect both cash flows and funding. This is frequently done through the use of proforma financial statements, which are calculated using techniques such as the percent of sales approach.
6. Value the business
While there are numerous approaches to valuation, the most common is a form of discounted cash flow analysis. These cash flows may be projected dividends or more detailed techniques such as free cash flows to equity holders or on an enterprise basis. Other approaches may comprise using relative valuation or accounting-based practices such as economic value added.
Now that you know the six steps to an effective financial statement analysis, things will be easier for you from the next attempt. Good Luck.
Analyzing a financial statement isn’t a cup of tea for everyone. The above article will give you an idea of the basics regarding this subject.
Michael Haydon teaches English in a reputed school. His financial statement analysis assignment help services at MyAssignmenthelp.com have helped numerous students and professionals to shine in their careers. He is passionate about poetry, fiction reading, gardening, and pets.