Analysis of the Operation and Financial Condition of the Enterprise

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Analysis of the Operation and Financial Condition of the EnterpriseEconomic analysis is the structural process of the research, as well as the assessment ofexposure to changes in external and internal factors as well as to the impact ofmanagement.There are the two following types of economic analysis distinguished. Macroeconomic analysis, which investigates the economic phenomena andprocesses across the world and within the economy of one state Microeconomic analysis which investigates the same processes and phenomena atthe level of individual business entities. The last one is exactly what is calledbusiness performance analysis.The complex enterprise business performance economic analysis occupies the centralplace in the enterprise management system. Management decisions are developed andjustified based on this analysis. No organisational or operational decision may beexecuted until its economic usefulness is proven. Management decisions and actionsmust be based on direct estimates as well as on thorough and extensive economicanalysis.Financial analysis is a component part of business analysis. Bringing the financialaspects in the forefront of a business entity performance as well as the increase insignificance of the financial role is a characteristic trend across the world. Therefore thepriority of an analysis grounded in the enterprise financial model is growing.The financial analysis of an enterprise may be performed not only by enterprisemanagers, but also by the existing and potential investors, banks, suppliers, and, therefore,it is possible to distinguish between the internal and external financial analysis accordingto the subject of analysis.Financial analysis can be defined as follows: accumulation, transformation andapplication of financial information for the purpose of: evaluation of the current and perspective financial position of an enterprise; evaluation of the possible and targeted speed of development of an enterprise fromthe point of view of the financial provision; clarifying the available sources of finance and assessment of their possibilities ofmobilisation and usefulness; forecasting the status of an enterprise in the goods and capital markets.Financial analysis is based on the assessment of the financial statements.The goals of financial analysis are as follows: to establish the financial position of an enterprise and to identify the possibilities toimprove the existing financial management methods, and to improve the financialstatus of an enterprise; financial analysis of an enterprise allows to establish and tomeasure by quantitative means the correlation between the enterprise performancefinal results and the resources used (material, financial, human etc. resources) that ituses in order to realise its current activities and enterprise development; to obtain the largest possible number of key measures that would allow for the mostcomplete assessment of changes in the enterprise financial position, profit and lossaccount, structure of assets and liabilities;28
Analysis of the Operation and Financial Condition of the Enterprise to early establish and prevent weaknesses in the financial and operating activities ofan enterprise as well as to find the possibilities for improvement of the financialposition.Upon the arrangement of the financial analysis of an enterprise business activities afirm should carry out the following procedures: select the methods for performance of analysis; identify the factors influencing the enterprise performance results; establish the trends of development of an enterprise by comparing theresults of the financial analysis with the preceding period; develop an action plan for strengthening of the financial position uponcompletion of the analysis.The objectives to be achieved upon performance of the financial analysis are as follows: assess the efficiency of utilisation of the financial resources by performing analysisof the financial results of the enterprise business activities; prepare a forecast of the possible financial results, based on the existing businessperformance results and alternative options for use of the resources; design the activities for improvement of the financial position and furtherefficiency improvement of the use of financial resources.2.2. Users of enterprise performance analysisIn free market economy the enterprise itself is an object of research by theenvironment that it operates in. Subjects of analysis are the users of information who areinterested in the enterprise activities. In Table 1 the summary of the most significantgroups of subjects of analysis, their input and the objects of financial analysis are shown.Subjects of analysis are enterprise owners, investors (banks, stock exchanges), themanagement, employees, customers, suppliers and also the government (tax authority).The different groups of interest provide different input in the activities of an enterprise andthey are each differently interested in the enterprise performance results. Each group has itsown object of financial analysis.29
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