Economic analysis of the enterprise

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:40

The world is full of entrepreneurs whose organizations are built on certain performance reviews, reports, income charts and so on. For them, business is life, and they invest it in their business. What does it take to be a successful start-up entrepreneur? Or what tips can even the most experienced businessman use? We will analyze in this article.

What is economic analysis?

Every business activity must, one way or another, pass a certain test. Such a check is usually economic analyzes or analyzes of financial stability. They determine the ability of an enterprise to develop, provide a quality product to the markets, be responsible for its consumption and, of course, make a profit for it.

These reports are starting to be carried out on the first indicators of the products sold. They help to find out absolutely all the factors, both positive and negative, that directly affect the quality of the product or its production. They also define the mainsolve problems and determine the future of the enterprise.

The main blocks of analysis

Each analysis consists of certain stages (blocks), during which problems of different levels of complexity and importance are solved. Economic research is divided into the following stages:

analysis of the volume of the product produced and the sale of goods on the market;
use of financial funds, consideration of investment prospects;
security and use of the necessary resources by the enterprise;
production costs;
business financial sustainability.

Following these criteria, which are present in every economic analysis of the enterprise, a businessman can guarantee his production a quality promotion.

Main Tasks

Each of the blocks of enterprise analysis has its own specific tasks, the performance of which depends on the productivity of the organization.

For example, the study of the use of fixed assets that a company has is divided into several points:

composition and movement of funds;
the impact of the use of funds allocated for wages on the organization's production volumes;
efficient use of funds;
identifying the prospects for the development of the budget and funds, increasing the efficiency of their use.

Cost

The next block is cost analysis. It is divided, in turn, into:

comparison of amounts, costs, items, calculations and reports;
conclusions on existing trends in entrepreneurship.

Financial reports

Every economic analysis involves financial reporting. This also applies to carrying out the relevant work, which consists of:

installation of financial analysis of the organization, its contents;
determine the effectiveness of how the enterprise is currently functioning, its financial position;
maintaining a sound financial policy.

But in the financial sector, things are not so simple. The report can be divided into detailed and express analysis.

Detailed - implies a detailed and accurate description of the position of the organization. That is, it takes into account both the financial and property part. It can concretize and supplement previous business improvement procedures.

This analysis aims to identify the parameters of the development of the organization and, unfortunately, as statistics show, a fairly large number of Russian businesses are in an unstable financial, and not only, state.

Express analysis is needed for a scheduled audit, it involves the selection of a small number of indicators from preliminary reports, then the analysis of accounting activities and general indicators.

What is financial analysis

An integral part of every organization,business project, even the planning of the opening of a new organization is the financial statements and analyzes that determine the opportunities, development prospects, parameters and ways of conducting. This work is done by a qualified staff - a business analyst.

Economic analysis of an enterprise always includes such a thing as financial stability. Without it, not a single entrepreneurial activity will have large incomes, and possibly will go into losses.

The financial condition of an enterprise is a whole system of indicators that reflect its ability (or inability) to pay off debts, loans, and plan investments. Financial activity covers most of the development processes of the organization, such as the movement and preservation of the property of the enterprise, control over how it is used.

Algorithm for analysis

So, we settled on the fact that every enterprise needs an analysis of financial stability. It is also part of economic analysis. But where to start? There is a whole algorithm for this, following which helps many entrepreneurs.

You should always start by defining the goals of a business project, its opportunities, prospects and tasks for a certain period.
Analysts are developing a special program of indicators, which systematizes the organization's indicators into certain groups. This helps to more easily characterize objects and conduct economic analysis.
Checked for accuracy andcredibility all information in reports that analysts use.
A planned comparison of reports from different years is being carried out, the prospect of progress is being determined.
Possibilities (or not possibilities) of using special reserves are identified, which are usually used in order to increase the efficiency of sales and the operation of the enterprise as a whole.
The overall performance rating is given.

This is the plan of the main analyzes that actively appear in the activities of each organization. Next, let's focus on the indicators - that is, the coefficients by which the necessary verification is carried out.

Characteristics of coefficients

Ratios play a big role in every analysis, just as the research itself is essential to the whole enterprise. What are these coefficients? Let's discuss the main ones.

Provision of the property of the organization

It is necessary to describe the required amount of finance that the entrepreneur has, part of the fixed and working capital in the total amount of all assets used, part of the funds that were put into operation and withdrawn from it.

Such important indicators as part of fixed assets, retirement rates or renewals are most important for enterprises whose field of activity is industrial and whose operation is based on the use of machine tools and other heavy structures.

However, these coefficients play practically no role for those enterprises and organizations whose field of activitywhich is directed to trade.

Liquidity

Due to the fact that different types and even groups of assets that are in circulation have completely different degrees of liquidity, a certain number of their degrees is calculated. For example, receivables or stocks of necessary raw materials are no longer suitable or not suitable enough to repay a debt, then financial resources are absolutely suitable for repaying any debt.

The development of economic analysis has reached a high enough level to determine all these degrees.

Liquidity indicators become more informative and useful for organizations, to some extent, by short trading stages (cycles):

Trade in a product and provide a service where trade is driven by mass demand.
Light industry.
Loan financing institutions.
Ship, aircraft engineering, construction, large industry research and development scientists (their assets, at first, have an insufficient degree of liquidity).

Thus, having different indicators and degrees of liquidity, you can achieve completely different research results. An economic analysis of the main criteria will provide an opportunity to improve the enterprise management system.

Financial sustainability

First, you need to assess the structure of income, sources of funding, if you look at them from the point of view of the organization's ownership (borrowed or owned),coefficients of availability and risk of their use. By the way, indicators of financial stability directly analyze the independence (or dependence) of a given enterprise on external financial factors (investments, creditors, etc.).

This group is extremely important for an organization that actively uses bank loans, debts, and uses investments. Socio-economic analysis implies regular reporting on this matter.

Also, with the help of all the above factors, a comparative analysis of all the resources involved to achieve a specific goal is carried out: labor force, financial resources, reserves, stocks, and so on.

Investment return

There is a whole algorithm that helps calculate this indicator.

The investment return ratio implies the product of the profitability of sales by assets in circulation. Moreover, each of these two indicators tends to be distributed among certain factors, which subsequently affect all indicators. The analysis of economic data is also extremely important here.

So, the calculation algorithm is as follows:

Full cost is made up of production, sales and administrative expenses of the company.
Net profit is calculated by subtracting the total cost from all revenue. Then the organization has net income indicators.
Profitability refers to the ratio of sales to net revenue.
Current assets are formed from financial reserves,accounts and payables.
Non-current assets are all buildings owned by the enterprise.
The turnover ratio refers to the ratio of net profit to all current and non-current assets.
The final indicator of investment return is in the presence of profitability and turnover.

The algorithm presented above is the "Investment Return Tree", or "ROI Tree".

That's how important it is sometimes to follow all the algorithms, rules, ways of doing business, to also have qualified specialists in order for your business to flourish.

It is also important to conduct financial and economic analyzes that will help identify existing problems, eliminate them and prevent new ones.