A SMART OVERVIEW OF FINANCIAL ANALYSIS
Financial Analysis is conducted internally in the company to identify the company’s strengths and weaknesses. Financial Analysis is used from a more external point of view for a number of reasons: To assess the performance of a customer or supplier. To assess performance of a takeover target or a potential investor in one’s own company. To assist in investment decisions of various kinds (buying shares in other companies).
The main purpose of the Financial Analysis is to gain an understanding of the major issues for the company. It works on Profitability, Earning Capacity, Capital Adjustment, Solvency and Liquidity. While making comments we focus on the direction of speed of the change, the level of the ratio or basis for comparison and the cause of the development. We are more focused on the performance of our customers or suppliers, performance of a takeover target or a potential investors, and to assist in investment decisions of various kinds (buying shares in other companies.
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KIKUHISA focuses on determining Ratio analysis. It uses tools to conduct a quantitative analysis of information. Ratios are usually calculated to evaluate the performance of the Company. There are many ratios that can be calculated from the financial statements pertaining to KIKUHISA’s performance, activity, financing and liquidity.
The Earning Capacity measures the operational performance of the business that is the KIKUHISA’s ability to generate profit from its sales (turnover). We use following ratios to access our earning capacity i.e, Profit Margin Ratio (It expresses the relationship between the profit generated by the business and capital employed), The Contribution Margin (it measures the profitability in selling or procuring goods for sale, before any other expenses than variable cost are taken into account) and The Capacity Ratio (it can be measure on Contribution Margin and Fixed Cost).
A Financial Position of each company is defined by its assets and liabilities. In Financial Position, KIKUHISA focuses Risks (The Operating Risk exists if there are factors which could cause costs to increase. Companies are particularly vulnerable to operating risks when they have a relatively high level of fixed costs), Gearing Ratio (A general term describing a financial ratio that compares some form of owner’s equity or capital to borrowed funds), Liquidity (It is the company’s ability to meet its short term debts and financial commitments) and Cash Flow Statements (It measures organization’s liquidity that usually consists of net income after taxes plus noncash charges against income).
Business Financial Analysis cannot stand alone as a comprehensive understanding of a company’s situation.
KIKUHISA focuses on External Analysis (It includes the Macro Environment Factors which means PEST Analysis and includes Politics, Economics, Society and Technology) and Internal Analysis (It aims to identify the strengths and the weaknesses of a company. In this respect the following analysis can be used i.e, A Buying Behavior Analysis, Value Chain Analysis, Business Structure and Management Review.
Kikuhisa evaluates all the ratios for the investment purpose either NPV, IRR or top-down, bottom-up investment approach. We have top financial advisors in our company who helps the senior management to take appropriate decisions for the company.