Analysis of the Operation and Financial Condition of the Enterprise

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Analysis of the Operation and Financial Condition of the EnterpriseThe result of high quality analysis, i.e., the evaluation checklist, is summarised in asingle table allowing for a highlight of the existing problems.Table 2.2 Summary scores of the points of the questionnaires (example)Ref. no Title of questionnaire Total evaluation of the sheetAt risk Unstable Acceptable Good1 Enterprise products andXservices (active transactions)2 Customers and markets X3 Competitors X4 Distribution of products andservices (transactions)5 Personnel, facilities andorganisation6 Accounting records, financialplanning and controlXXXThe drawback of this system of measures in practice is that there is no one singlequantitative measurement defined that would allow finding out how would each of themeasures considered here would affect the attainment of goals in general.2.4. Role of analysis in the activities of an enterpriseEnterprise performance analysis uses information that describes the following: the economic potential of an enterprise (size of the enterprise) – this information isused for comparison of the scope of enterprise operations with other enterprises andfor ranking the enterprise in the local and international level. Such data aresummarised and published in newspapers, statistical bulletins, yearbooks and inother similar publications. Analysis of the economic potential of an enterprise usesthe following: enterprise assets, annual turnover, number of employees, enterpriseequity, amount and value of the goods produced, amount of investment anddistribution; business operations of an enterprise - several measures can be used here in variouscombinations. Among those are the following can be mentioned: revenues, theirstructure, costs, their structure, sources of enterprise assets etc.; efficiency of business operations – measures used to find out the efficiency arecorrelated to the profit gained. These measures may be both absolute andconditional: profit (operating profit, net profit), profitability (in relation to turnover,assets, liabilities); financial status – the measures describe the extent to which the enterprise dependson its sources of financing: equity structure, liquidity ratio, solvency;36
Analysis of the Operation and Financial Condition of the Enterprise competitiveness – the capacity of an enterprise to compete in a certain goodsmarket is in direct correlation with the competitiveness of the goods in question andthe economic methods of the enterprise operations, which, on its turn, affects theresults of competition. The objective is to clarify those factors that influence theattitude of customers towards the enterprise and its output in the market, as well asthe changes in the enterprise market share within a particular market. The followingbelongs to this set of measures: market share of the enterprise, quality of goods.Business performance analysis is an indispensable pre-condition forplanning. In order to perform substantiated planning of enterprise business activities it isnecessary to analyse in detail the implementation of the plan for the preceding period ofoperation. Analysis not only offers the possibility of researching the success of activities ofa certain enterprise, but also to compare them to other same industry enterprises. This helpsto prepare optimal plans by ensuring high rates of operational growth.In order for the business activities to be efficient, entrepreneurs must be able toidentify what and in what amounts should be produced, what is the capital requirement andhow to provide for it. Therefore, the extent of the production costs of the output must bespecified in order for the enterprise to gain sufficient profit; not only the strengths, but alsothe weaknesses of an enterprise must be assessed, that after having received moreattention, would ensure larger efficiency of enterprise operations. The systematic layout ofbusiness performance analysis is displayed in Figure 1.Enterprise performance analysis is the connecting link between accounting anddecision-taking. During the process of analysis the information is being analyticallyprocessed – the existing results are compared to the results of the previous years as well aswith the forecasted. The enterprise results are likewise being compared to businessperformance analysis of competitors as well as with the industry average results. Theimpact of the various factors on the resulting values is being established; there areinaccuracies, errors, unused opportunities and prospects disclosed.With the help of analysis problems are identified, their causes are established, thedevelopment is being projected and the possibilities for their prevention are beingdiscovered. Management decisions are developed and substantiated based on the resultsanalysis.Financial andmanagerial accountsAnalysisManagementdecision-takingPlanning andforecastingOrganisation Control AdjustmentsInput at the startof the cycleCreation of value added(production, selling, investing)Output and services at theend of the cycle37
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Analysis of the Operation and Financial Condition of the Enterprise

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