In order to assess the functioning of a company, it is important to carry out some analyses. One of these is the valuation, which is a very important step. It consists of analyzing and assessing the state of a company's cash flow. But how do you go about doing a financial analysis? Read this article to find out the two main steps.
Analyzing the quantitative elements of the business
The first step in doing a financial analysis of a business is to study the quantitative elements of the business. Indeed, it is important to study all the quantitative elements of your company in order to make the balance sheet and determine the rate of involvement in the development of the company.
It is, therefore, necessary to analyze the state of suppliers, customers, regulations, and the technological environment. These elements constitute the external environment of your company. In particular, you need to look at payment times, negotiating strengths, the development of services and products in the market and the composition of your target customer base.
Also, you need to analyze the internal environment of your company. This consists of taking stock and studying the different products and services you offer to your customers, the positive and negative points of the company, the means, the cash flow as well as the personnel.
Analyzing the financial elements of the company
To do the financial analysis of your company, it is important that you also study the financial statements of the company. Thus, you must necessarily study and make an assessment of the evolution of all the elements that are related to the financial account.
To do this, you must look at the analysis of the company's main activity. This will enable you to determine the level of involvement of the business in the development of your company's cash flow. Also, you should analyse the investment cycle and the level of profitability of the investment. Finally, it is essential that you carry out a study of the financial balance of your company.