Bojan Radojicic on LinkedIn: #finance #analysis #kpis | 13 comments (2024)

Vertical and Hotizontal analysis together are required for the 360 degree assessment of the financial health of a company.

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Vertical and horizontal analysis

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(Q) Could you please share the relationship between financial modeling, financial reporting and financial analysis?Do they each have specific structure?(A) Some do, but not all.(1) Financial Reportingis subject to a high degree of standardisation.The reason for this is so that the greatest number of different users can - as readily as possible - understand as clearly as possible what's being reported.For formal publication they must always include a balance sheet.Together with up to 4 of the other primary statements.Making up to 5 in total.They include historic information for recently completed reporting periods.For example, our income statement for the year ended 31 December just passed.(2) Financial Analysismeans doing further work on relatively raw financial information.For example, we could calculate "profit margin".This analysis is often based on historic published financial information.Most financial analysis includes a lot of financial ratio analysis.For example, we have a lower profit margin than our competitor.But we both have a higher profit margin in our most recent year, compared with the year before.There are many financial analysis measures.However, there are also a large number of very standardised, widely recognised ones.Depending on the purpose of the financial analysis, we might select any appropriate dashboard of measures to consider and include in our analysis.Depending on what we find in our initial investigation, we might get more data, or calculate more measures on the data we already have.We can undertake financial analysis either on look ahead data, or historic data.Published financial statements are an important source of historic data to do analysis on.But there are other important sources too.For example, share prices.(3) Financial Modelling (or modeling)means doing financial calculations in order to:- Support financial decision making;- Including valuation, and the evaluation of risks.It usually has a substantial forward looking element.And also a "what if" element.The purpose of the financial model will drive its structure.It's really excellent practice to standardise the formatting of as much of our work as possible.That enables it be to transferred between different contexts and platforms more readily.For example, to forecast our financial statements in a format that translates very easily into the externally reported format.However, in practice many financial models are not structured well or consistently.It's also a great practice to discuss all our reporting, modeling and analysis with its users, including the formatting.#sustainability#education#finance#financementor#capitalmarkets#stakeholders#understanding#collaborating

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📈 Financial Analysis:Financial analysis is the cornerstone of sound financial decision-making. It's about more than just crunching numbers; it's about extracting meaningful insights that guide organizations to success. As a finance professional, mastering this core competency involves:📊 Proficiency in Analyzing Financial Statements and Data: This skill enables us to dissect financial statements, balance sheets, income statements, and cash flow statements. It involves a deep dive into the numbers, dissecting each element to uncover strengths, weaknesses, and opportunities for improvement.📈 Ability to Identify Trends, Ratios, and Key Performance Indicators: Recognizing trends within financial data and calculating vital ratios is essential for making informed judgments. These metrics, like the current ratio, debt-to-equity ratio, and return on assets, offer a window into a company's financial health and performance.💪 Skill in Assessing the Financial Health of a Company: Assessing financial health goes beyond profit and loss. It's about understanding liquidity, solvency, and overall stability. A keen eye for risk assessment and the ability to spot red flags can be the difference between success and turmoil.In today's dynamic business environment, financial analysis is more crucial than ever. It informs strategic planning, aids in resource allocation, and ensures a strong foundation for financial decisions. It's the bedrock on which successful businesses are built.How do you approach financial analysis in your role? What techniques and tools do you use to extract valuable insights from financial data? Let's discuss and continue sharpening our financial analysis skills together. #FinancialAnalysis #FinanceSkills #DataAnalysis 💼📊📈📉

Demystifying Financial Statement Analysis Methods 📊💡Financial statement analysis is a cornerstone of assessing a company's health and value. It equips investors, analysts, and businesses with the tools needed to decipher the financial data presented in income statements, balance sheets, and cash flow statements. Key Methods:🔍 Ratio Analysis: The art of comparing key financial ratios such as profitability, liquidity, and solvency to gauge a company's performance and stability.📈 Trend Analysis: Examining historical financial data to identify patterns and detect shifts in a company's financial health.📊 Common Size Analysis: Expressing financial items as percentages of total revenue or assets to uncover insights about a company's structure and operations.Significance:🧐 Informed Decision-Making: Understanding financial statement analysis methods empowers investors to make well-informed decisions, mitigating risks and optimizing opportunities.💰 Valuation: These methods play a pivotal role in determining the worth of a business, guiding mergers and acquisitions, and shaping investment strategies.Benefits:⚖️ Risk Assessment: Identify potential financial distress or instability in a company.📊 Performance Evaluation: Evaluate past performance and forecast future success.🏢 Comparative Analysis: Compare companies within the same industry or sector effectively.📈 Data-Driven Strategy: Equip businesses with insights to make data-driven financial decisions.Financial statement analysis methods are the compass that guides financial professionals through the vast sea of financial data. 🌟🔑💰#FinancialSuccess #BusinessGrowth #BookkeepingBenefits #bookkeeping #bookkeepingservices #acccounting #xero #xeroaccounting #quickbooks #quickbooksonline #smallbusinessowner #sme

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What is Horizontal Analysis? Horizontal analysis is a financial analysis technique that compares financial data over a specific period of time, typically two or more accounting periods. The purpose of horizontal analysis is to identify trends and changes in a company's financial performance and position over time.To conduct a horizontal analysis, financial statements such as the income statement and balance sheet are compared year-over-year or quarter-over-quarter to determine changes in specific line items. The percentage change in each line item is calculated and analyzed to determine the direction and significance of the change.Horizontal analysis can be used to identify areas where a company's financial performance has improved or deteriorated over time. This information can be used by investors, analysts, and management to make decisions about future investments, financial planning, and overall strategy.#audit #auditreport #auditandassurance #financialanalysis #horizontal #accounting #financialplanning #strategy

📊 Financial Statement Analysis Simplified 📊💼 Financial statement analysis provides valuable insights into a company's financial health and performance. ↪️ By examining financial statements, professionals gain a comprehensive understanding of a company's profitability, liquidity, and solvency.👇 Let's explore the world of financial statement analysis! 💼🔍 Key Financial Statements:1️⃣ Income Statement 💰📈: 🔸️ Shows revenue, expenses, and net income. 🔸️ It reflects profitability and efficiency.2️⃣ Balance Sheet ⚖️💼: 🔸️ Presents assets, liabilities, and equity.🔸️ It assesses solvency and financial position.3️⃣ Cash Flow Statement 💸💼:🔸️ Tracks cash inflows and outflows, highlighting liquidity and cash management.✨ Key Steps in Financial Statement Analysis:1️⃣ Review Basics: 🎯 Understand the structure and components of financial statements.2️⃣ Common-Size Analysis 📈🔎: 🎯 Express line items as percentages to compare across time or companies.3️⃣ Ratio Analysis 📊🔢: 🎯 Calculate key financial ratios for comprehensive analysis, including: - Liquidity Ratios: Assess short-term ability to meet obligations. - Profitability Ratios: Measure ability to generate profits. - Solvency Ratios: Evaluate long-term financial viability. - Efficiency Ratios: Assess effectiveness in utilizing assets and resources.4️⃣ Trend Analysis 📈🔄: 🎯 Evaluate changes in financial data over multiple periods.5️⃣ Comparative Analysis 📉🔍: 🎯 Compare financial performance to industry peers.6️⃣ Interpretation & Decision-Making 💼📊: 🎯 Utilize insights to make informed business decisions.💼 Financial statement analysis is a critical skill for professionals to make informed decisions and assess a company's financial well-being. 👉 By leveraging financial statements and analysis techniques, professionals gain valuable insights to drive success.#Finance #FinancialAnalysis #FinancialStatements #DecisionMaking #ProfessionalDevelopment

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simple way to put it together..

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📊 Financial Statement Analysis Simplified 📊💼 Financial statement analysis provides valuable insights into a company's financial health and performance. ↪️ By examining financial statements, professionals gain a comprehensive understanding of a company's profitability, liquidity, and solvency.👇 Let's explore the world of financial statement analysis! 💼🔍 Key Financial Statements:1️⃣ Income Statement 💰📈: 🔸️ Shows revenue, expenses, and net income. 🔸️ It reflects profitability and efficiency.2️⃣ Balance Sheet ⚖️💼: 🔸️ Presents assets, liabilities, and equity.🔸️ It assesses solvency and financial position.3️⃣ Cash Flow Statement 💸💼:🔸️ Tracks cash inflows and outflows, highlighting liquidity and cash management.✨ Key Steps in Financial Statement Analysis:1️⃣ Review Basics: 🎯 Understand the structure and components of financial statements.2️⃣ Common-Size Analysis 📈🔎: 🎯 Express line items as percentages to compare across time or companies.3️⃣ Ratio Analysis 📊🔢: 🎯 Calculate key financial ratios for comprehensive analysis, including: - Liquidity Ratios: Assess short-term ability to meet obligations. - Profitability Ratios: Measure ability to generate profits. - Solvency Ratios: Evaluate long-term financial viability. - Efficiency Ratios: Assess effectiveness in utilizing assets and resources.4️⃣ Trend Analysis 📈🔄: 🎯 Evaluate changes in financial data over multiple periods.5️⃣ Comparative Analysis 📉🔍: 🎯 Compare financial performance to industry peers.6️⃣ Interpretation & Decision-Making 💼📊: 🎯 Utilize insights to make informed business decisions.💼 Financial statement analysis is a critical skill for professionals to make informed decisions and assess a company's financial well-being. 👉 By leveraging financial statements and analysis techniques, professionals gain valuable insights to drive success.#Finance #FinancialAnalysis #FinancialStatements #DecisionMaking #ProfessionalDevelopment

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📊 Financial Statement Analysis Simplified 📊💼 Financial statement analysis provides valuable insights into a company's financial health and performance. ↪️ By examining financial statements, professionals gain a comprehensive understanding of a company's profitability, liquidity, and solvency.👇 Let's explore the world of financial statement analysis! 💼🔍 Key Financial Statements:1️⃣ Income Statement 💰📈: 🔸️ Shows revenue, expenses, and net income. 🔸️ It reflects profitability and efficiency.2️⃣ Balance Sheet ⚖️💼: 🔸️ Presents assets, liabilities, and equity.🔸️ It assesses solvency and financial position.3️⃣ Cash Flow Statement 💸💼:🔸️ Tracks cash inflows and outflows, highlighting liquidity and cash management.✨ Key Steps in Financial Statement Analysis:1️⃣ Review Basics: 🎯 Understand the structure and components of financial statements.2️⃣ Common-Size Analysis 📈🔎: 🎯 Express line items as percentages to compare across time or companies.3️⃣ Ratio Analysis 📊🔢: 🎯 Calculate key financial ratios for comprehensive analysis, including: - Liquidity Ratios: Assess short-term ability to meet obligations. - Profitability Ratios: Measure ability to generate profits. - Solvency Ratios: Evaluate long-term financial viability. - Efficiency Ratios: Assess effectiveness in utilizing assets and resources.4️⃣ Trend Analysis 📈🔄: 🎯 Evaluate changes in financial data over multiple periods.5️⃣ Comparative Analysis 📉🔍: 🎯 Compare financial performance to industry peers.6️⃣ Interpretation & Decision-Making 💼📊: 🎯 Utilize insights to make informed business decisions.💼 Financial statement analysis is a critical skill for professionals to make informed decisions and assess a company's financial well-being. 👉 By leveraging financial statements and analysis techniques, professionals gain valuable insights to drive success.#Finance #FinancialAnalysis #FinancialStatements #DecisionMaking #ProfessionalDevelopment

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