Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
The financial analysis is the cornerstone of the valuation of the solvency of your
clients. Don't panic! It is simple. The most important is:
the understanding of the balance sheet and of the profit and loss
account,
their analysis with key indicators.
We are not going to get lost in interminable calculations but we will analyse simply
what is the most important. By chance, it is in front of our eyes on first pages of
the financial statements of your customers.
Compare the evolution of the turnover and the profitability on last 3 financial years (5 so possible) to determine the
medium-term viability of your client.
Why?
Simply because the need in cash rises with the increase of
the turnover while financial resources do not increase.
Consequently, problems of financing of growth and cash
difficulties can appear, which can be controlled only
with thirds contributions (banks, factoring, credit given
by suppliers etc).
This will reduceh the financial autonomy of the company.
Calculation
Interpretation
Trade margin
Sales of
goods - purchases
of goods + Goods
inventory change
Value added
Trade maring +
Production
- purchases of raw
material - other
purchases and
external charges
operating profit
before
depreciation and
amortization
(EBITDA)
Operating profit
Financial result
Operating profit +
financial result
Exceptional result
Net income(profit
or loss)
The most important is to determine what are the main part in the P&L contributing to the net income (positive or
negative) and to understand what is the size of the company, what are its strengths and weakness, the evolution in its
turnover and profitability...etc. These indicators allow you to refine your understanding of the business by zooming
into some key points generating income or losses. A detailed analysis will also help you to check if there are some
manipulations in the financial statements.
to repay loans,
to invest,
to pay shareholders,
The cash flow is a key indicator in many aspects. It is very important for shareholders because it is strongly linked to
their earnings. It gives confidence to creditors about the company's ability to repay the debts and allows managers to
invest in the development of their business.
How calculate the Cash flow: Net income + depreciation