Financial statements are formal records of the financial activities and position of a business, person, or other entity. The proper analysis of the relevant financial information is presented in a structured manner and in a form which is easy to understand. Financial analysis reports highlight the financial strengths and weakness of the business, but also report communicates the financial health of the company to investors.
The proper analysis consists of the five key areas:
1. Revenue
2. Profits
3. Operational Efficiency
4. Capital Efficiency and Solvency
4. Liquidity
We followed the steps by gathering financial statement information by collecting the data (income statement, cash flow statement, balance sheets). The calcul of ratios will give a snapshot of the business financial health and evaluate the profitability of the investors. Finally, the step of conducting a risk assessment by identifying risks, document risks, determine controls to reduce risks, and how to review them regularly.
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