Analysis of the Operation and Financial Condition of the Enterprise

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Analysis of the Operation and Financial Condition of the Enterprise2. Theoretical aspects of enterprise performance analysis2.1. Concept, principles and forms of enterprise performance analysis2.2. Users of enterprise performance analysis2.3. Quantitative and qualitative measures for achievement of the goals of enterpriseowners2.4. Role of analysis in the activities of an enterprise2.5. Techniques and methods of analysis2.1. Concept, principles and forms of enterprise performance analysisTerm ‘analysis’ is derived from the Greek language which translates as ‘divide,split’. Any division allows for an insight into the inner parts of the object of study and tofind out the meaning of each component. Analysis is in the wider meaning understood asthe ability to cognise the subject and the phenomena of the external environment, based onthe division of a single item into its component parts and their examination in its entirety.Enterprise management is the process of implementation of the managementfunctions. It is related with performance of numerous business transactions altogethercomprising the business operations of the enterprise. Business performance analysis iscarried out before the adoption of important decisions; it is used to justify managementdecisions and actions, and serves as a scientific substantiation in enterprise management, aswell as ensures the objectivity and effectiveness of the decisions taken.Managers cannot rely solely on their intuition. Management decisions and action mustbe substantiated with accurate estimates and comprehensive economic analysis.Business performance analysis should always provide answers to the following questions: What happened? Why did it happen? What and how should be done in the future?The answer to the first two questions only provide with the statement of facts. Thethird question is the most significant one. To provide the answer to this question is exactlythe purpose of the enterprise performance analysis.Management decisions and the consequences of their execution depend onenterprise performance analysis. Enterprise performance analysis should correspond to presetrequirements (principles) and it should be as follows: Objective and definite – based on clear, strongly tested measures Complex and systematic, i.e., every measure must be studied in combination withother related and analogue measures; Perspective – all measures must be set for the perspective in order to be able toforecast what impact would be exerted on them by introducing novelties intechnology, machinery, labour organisation of the enterprise as well as in theapplication of experience; Operative and timely requiring constant and daily control over enterprise activities,fast processing of data and implementation of the necessary measures;26
Analysis of the Operation and Financial Condition of the Enterprise Specific – the results obtained from the analysis should transform in real activitiesfor the improvement of all areas of enterprise activities; Scientifically grounded; Practically applicable and usable; Effective.This is the only approach to the enterprise performance analysis that can make iteffective and necessary for improvement of company activities.There is a certain information base required in order to perform analysis. Itsquality depends on the overall enterprise financial accounting and the quality of reporting,and the extent to which the figures included therein are true and fair.Each group of its users have their own interests in the enterprise, as well as theirown object and target, for example, the main target for the enterprise owners is thedividends, therefore, the object of financial performance for them is the enterpriseoperating results, while the target for the suppliers is the payment for the goods,therefore, they are interested in the solvency status of an enterprise.The following data are used for analysis: accounting records, statistical reports; budgeted and standard materials (consumption standards of materials, estimates,payroll rates); contracts, orders, minutes of production meetings; individual studies of those performing the analysis, stock-take information.Business activities of an enterprise in a wider sense are comprised of several sub-systems(operational, financial, investment etc.) Analysis may be aimed at one of the abovementioned sub-systems of business activities. In this respect analysis is further divided intothe following: economic analysis; financial analysis; marketing analysis is used to research how the external environment is functioning.Measures in the raw materials market and the ready goods sales market,competitiveness of an enterprise, formation of the pricing policy, development ofthe strategy for marketing, enterprise SWOT analysis is being researched andanalysed; investment analysis, which is used for the development of the investing operationsprogramme and the assessment of its efficiency as well as for justifying of theoptimal investment option; social analysis used for the assessment of further development opportunities in thesocial field. Studies the opportunities for improving the terms of employment,employee motivation incentives, increasing the efficiency of enterprise functioning; institutional analysis, which is used when assessing the political and organisatorialconditions affecting the activities of an enterprise. Here the legislative framework,the enterprise relations with the local government, business partners andcompetitors are studied Strategic policy in the area of business cooperation thatinfluences the improvement of efficient functioning of an enterprise is beingdeveloped.27
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Analysis of the Operation and Financial Condition of the Enterprise

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