Financial analysis is a tactic that can be used by small business owners in order to weigh the effect of certain decisions. It can also be used by investors or firms who are looking to invest in a certain small business. By sifting through balances sheets, cash flow statements, income, and current financial statements, these people can fairly accurately determine the value of the company and the potential for future growth. Whether you’re an individual investor, an investment firm, or a small business, A & N Accounting is here to help with professional financial analysis services. Give us a call today or read on to learn more about the purpose of financial analysis.

Financial Statements

Financial analysts are able to examine a company’s past and current financial statements to determine if there are weaknesses or problems that the company’s owner should be aware of. For example, if there are any sudden increases or decreases in profit, this may be a sign for concern, but if there is steady growth and everything else seems to be running normally, there usually isn’t too much cause for concern. In order to determine how a company usually obtains and uses its cash, a cash flow statement can be used. Financial analysis can also be used by the company’s management as a type of annual review.

Ratio Analysis

In order to compare year-to-year values and compare your business to other similar companies, you need ratio analysis. A debt ratio will tell you what percent of the company’s assets are provided by debt. A higher percentage indicates a higher risk while a lower percent means a lower dependence on debt. This can be used by small business owners as a means of keeping debts low and reducing loans.  

Future Performance Evaluation

By evaluating income statements, cash flow statements, and balance sheets, small business owners will be able to more easily identify strengths and weaknesses and interpret trends. After this is done, you’ll be able to make projections of profit and revenue for several years in the future. It helps if your management understands trends in the general economy and in the industry specific to your business. This is especially helpful if you need to buy equipment or other initiatives in the near future.

Explore All Your Options

Fortunately, there are options available to you when considering financial analysis. Big companies may choose to hire their own financial analyst who can advise upper management on an ongoing basis. Alternatively, small businesses may opt for a financial consultant who can perform financial analysis periodically, however often it’s needed. Here at A & N Accounting, we are accountants, bookkeepers, and general financial experts. With years of experience, we will be able to get in quick and begin evaluating the financial strengths and weaknesses of your business. If you have any questions for us or you’re ready to get started with your free consultation, don’t hesitate to give us a call.