Analysis of the Operation and Financial Condition of the Enterprise

More documents

Recommendations

Info

Analysis of the Operation and Financial Condition of the Enterprisecaused by two factors: the amount of stock of goods for sale and the prices for purchasesand raw materials and irrational management in enterprise etc. reasons.For the assessment of net profit both the absolute and the relative measures mustbe compared to the accounting data from the previous years and the current data.Ratios are a highly powerful instrument of the enterprise analysis if: Ratios are calculated on a regular basis and their trends and changes can bemonitored Ratios estimated for one enterprise can be compared to the industry averagefigures Ratios have been prepared by taking their correlations and interrelationshipsinto consideration.Dependent on specific objectives several financial measures or their combinationsare used that altogether provide with an assessment of business performance. Measures describing the economic potential of an enterprise: assets; turnover; number of employees.These measures are used for comparison of the enterprise scope of activities withthose of other enterprises operating in both local and the international markets.Other measures may be used for a more detailed research of the economic potentialof an enterprise: Enterprise equity – indicating the production capacities of the an enterprise(buildings, constructions, equipment) for own needs as well as the capacitiesintended for leasing out to other enterprises. This may include also assetsintended for repairs and replacement of production equipment items. Amount and value of production output of the enterprise in general with abreakdown by types of production. This indicator allows to establish the share andthe place of an enterprise in the total industrial production in the country togetherwith the production structure of the enterprise under consideration. Distribution of the production facilities and sales facilities in the countryand abroad, their size, the nature of output that is being produced and sold. Description of infrastructure – amount of own assets (transport vehicles,warehouses, technical support centres etc.), own base of raw materials and sourcesof energy. Amount and distribution of direct capital investments within an enterprise,within the country and abroad. Measures describing the business performance of an enterprise: Total expenditure measures – including expenditure for market study,research and development, administration expenses and expenses for delivery ofgoods; Revenue measures – net profit, depreciation deductions, disposal on sale ofassets, direct financing, share issue, increase in debt.66
Analysis of the Operation and Financial Condition of the Enterprise Measures for use of assets – payout of dividends, organisational expenses,capital investments and intangible asset investments, repayment of short-termdebts, purchase of readily realisable securities, increase of cash assets. Measures describing the efficiency of business performance of an enterprise:Profit – the key measure of efficiency of the enterprise business performance. It isexpressed in absolute figures (gross and net profit). In the course of analysis either anincrease or a decrease in profit is being identified. This is expressed relative figures(profitability). In relation to the sources of capital, to the different asset elements: The relationship between profit and net turnover describes the degree of thetrading profitability of an enterprise. By comparing this variable with variablesfrom the previous period the changes in both the prices and in the amounts ofsales have to be taken into account. The relationship between profit and assets demonstrates the profitability ofuse of the working and the equity capital. The relationship between profit andequity capital shows the efficiency of use of the equity capital in financing of theenterprise. Changes in this measure affect the listing of the enterprise shares in thestock exchange. The relationship between profit and the equity capital describes the rate ofutilisation of the long-term investment capital. The relationship between profit and the debt capital. Measures describing the financial position and solvency of an enterprise.Describe the extent of dependence on the sources of financing. These measures focuson the following areas: The capital structure (equity capital, income from issue of shares, retainedearnings). Increase in the equity capital on account of profit evidences theimprovement in the financial independency of an enterprise; The relationship between equity and the total amount of assets evidences thedependence on external sources of financing. The higher this ratio is, the moreindependent is the enterprise. The relationship between total assets and equity. Measures describing the competitiveness of an enterprise The relationship between gross profit and net turnover in comparison withthe previous period (if the ratio goes up, competitiveness is maintained, but if thevalue goes down - also competitiveness decreases) The relationship between net turnover and the value of stock – showswhether there has been a decrease in demand for the goods or whether the amountof stock has increased The relationship of net turnover and the amount of debtors’ debts reflectwhat share of the output has been sold to customers on credit.4.2. Liquidity measuresLiquidity of current assets means their ability to convert into cash, and the degreeof liquidity is determined by the length of the period during which such conversion can67
Page 1 and 2:
Analysis of the Operation and Finan
Page 3 and 4:
Page 5 and 6:
Page 7 and 8:
Page 9 and 10:
Page 11 and 12:
Page 13 and 14:
Page 15 and 16: Analysis of the Operation and Finan
Page 65: Analysis of the Operation and Finan
Page 103 and 104: Dec.,2XX7Analysis of the Operation
Page 117 and 118:
Page 119 and 120:
Page 121 and 122:
Page 123 and 124:
Page 125 and 126:
Page 127 and 128:
Page 129 and 130:
Terms of ReferenceAnalysis of the O
Page 131 and 132:
Page 133 and 134:
Page 135 and 136:
Page 137 and 138:
Page 139 and 140:
Page 141 and 142:
show all

Analysis of the Operation and Financial Condition of the Enterprise

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?