Surviving in business isn’t just about offering a good product or service. Your company’s numbers say a lot about it and for that reason the financial analysis It’s basic.
According to the Mexican Román Hernández Ríos, a specialist on the matter, who Indicators are essential to make important decisions. In other words, financial analysis is more than just logging and summing up in spreadsheets. It’s a bit like compass who run the business.
The basic steps of financial analysis
A small business with few resources does not need to start its financial analysis with a multitude of indicators. But it is important that this work is carried out systematic way. Although more complex than creating a household budget, the goal is the same: Evaluate the numbers to better manage resources.
This is the priority when it comes to financial analysis. It clearly means you The billing must be higher on your costs of production so that the company is truly viable. Fixed costs, variable costs, taxes and duties in general must be taken into account. Evaluating all of these factors will reveal whether your cash flow is good or bad.
Within your accounting there are a number of factors that need to be analyzed to verify this financial health Of your company. It’s a kind of check-up, a series of numbers, each from a different angle – but if they’re all positive, your business will achieve its goals without risk. We can highlight the following categories of indicators:
of liquidity: evaluates the company’s ability to meet its requirements obligations to in the short term. If your company shows a delay in solving short-term problems, you already know that this indicator needs to be evaluated and improved. It is very important for the survival of the company.
In this position, the main indicators used by analysts are operating margin, EBITDA margin, liquid margin and return on equity.
of debt: Yes, in order to have a clear idea of the company’s financial situation, this should be checked level of commitment with borrowed capital, which is nothing more than debt. In this subject area, not only the borrowing from banks, but also the payment to suppliers is evaluated.
profitability in sales: checked the relationship of operating profit with sales made. It is necessary to deduct all taxes to make the sale and then analyze the benefits.
of activities: This is twofold. One of them analyzed medium term that the company claims to receive for its sales, while another expresses respect for the average payment term for its suppliers.
After an X-ray of the company’s assets, which is carried out through a financial analysis, it is also possible to evaluate the growth of the company liquid funds. The company’s market share can also serve as a growth indicator.
Now that you know the main indicators to make a complete analysis, just put them into practice and you have one good diagnosis the financial health of your company.