Analysis of the Operation and Financial Condition of the Enterprise

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