Company Analysis is an important process conducted by financial investors to assess securities, gathering information on the business s profile, products and services, and profitability. Company Analysis is also known as fundamental analysis. A company analysis includes basic information about the company, such as the company s history and its objectives and beliefs about the market. Financial analysts combine technical and fundamental analysis to arrive at a reliable picture of the health of the company s finances and how well it is performing in the business.
The Fundamental Analysis:
The fundamental analysis makes use of many mathematical tools to arrive at a financial health rating for the company. Some of these tools are The P/L (Profit and Loss), EBIT (earnings before expenses), and GAAP (Generally Accepted Accounting Principles). There are different factors that must be considered in company analysis, some of them are The age of the company (especially relevant if the company has been trading for a long time), the industry it is involved in, the financial health and complexity of the business, the competition and the sector in which it is involved. This article will highlight some of the most important factors that should be analyzed when coming up with a company analysis.
First, you need to decide whether you will conduct a detailed internal or external review of the company's financial records and code them into an analysis report. While internal review can take some time, it is usually quite thorough and validates the accounts, and provides an objective and independent view of the business. External Company Analysis, however, is a more complicated matter and requires considerable time and resources to prepare. In this case, it would be more useful to hire an independent consultant for the task. For an external consultant to carry out a thorough company analysis, there are three primary factors you should consider: The size of the company, the financial health of the company, and the competitive environment in which the company operates.
The size of the company is one of the most important factors in company analysis and represents the total number of company shareholders or owners. Assuming that all shareholders or owners have equal rights to management stock, then the size of a particular company reflects the level of ownership. A company analysis should focus on the ratios of current assets to current liabilities. The reason why this is important is that it gives you a decent idea of the liquidity of the company and its ability to raise more capital if required. The ratios of a company analysis will usually be lower than that of an income ratio analysis because the latter relies more on the quality of the underlying income-generating business.
The Financial Health:
The financial health of the company analysis of its financial statements and the related internal and external reports provides investors with an overall picture of the business' performance. For example, a steady profit growth over a long period of time indicates that the company is doing fairly well. However, this is only one indicator of the health of the business and it is extremely important to know whether the same profits are being achieved without any significant change to the business model. Therefore, it is extremely important to conduct a company analysis in line with the annual reports.
Companies can obtain an industry analysis report from several sources. Most often, a company analysis report is prepared based on research conducted by management in order to come up with a concise report. For example, a management team may decide to research the financial health of the oil & gas industry. Based on the research they conducted, the team would create a company analysis report indicating what are the challenges and opportunities that they believe the oil & gas industry faces in the next few years.
A thorough evaluation of a company's financial statements and the related internal and external reports prepared by management provides insight into company analysis and its usefulness as a source of information for investors. Detailed financial statements provide a complete picture of the functioning of the company including revenue, expenses, net worth, tangible assets, liabilities, and equity. Proper financial reporting provides the key information that a company needs in order to make sound decisions.
Importance Of Company Analysis:
Industry analysis reports help a company understand its competitive environment. Competitive intelligence enables a company to make informed decisions to strengthen its competitive position in the market. By identifying weaknesses and defining ways to overcome them, companies have the ability to become stronger and more profitable. A thorough and timely analysis of the competitive environment helps a company to identify the opportunities for growth and build a platform for sustained competitiveness. The objective of company analysis and the timeliness of the analysis is essential in achieving a robust, profitable business. Try out the Expedited Shipping services in Canada as well.