Methods and principles of economic analysis

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:41

Economic analysis is carried out to determine the trends of certain economic patterns and trends. This allows you to draw conclusions about the development of the object under study, as well as predict its state in the future. In this case, certain methods and principles of economic analysis are applied. They will be discussed in detail below.

General definition

Methodology and principles of economic analysis allow us to assess the state of the object under study and predict its development in the future. This is an important procedure that is applied in the course of managing an organization or other system. Economic analysis allows you to assess the state of the general conditions in which the entity operates, as well as its state and prospects.

With the help of this action, they receive information about the processes that take place in the economic environment. Based on these data, the governing bodies choose the course of development of the object under their control. This allows you to create a solid foundation for the development of the object of study in the future.

During this process, constraints are identified. After developing appropriate measures to eliminate them, it turns out to significantly increase the efficiency of the facility. Therefore, the analysis of various economic indicators is an important work on which management decisions are based in the long and short term.

Subject and content

One should understand the basic principles and content of economic analysis. This process allows you to study the economics of the organization. It is considered in terms of compliance with previously developed business plans. Particular attention is paid to the assessment of existing resources. This is necessary to identify unused reserves. All capital, property owned by the organization must be used rationally and efficiently.

The subject of analysis is the state of property and finances of the company, its current business activities. The main indicators are considered in dynamics. This allows you to identify existing trends. When unused reserves are identified, management develops a plan for their application in the course of the organization's business activities.

The content of such a study is a detailed, comprehensive study of various aspects of the organization's activities based on available sources of information. It aims to improve the quality of the organization. To do this, appropriate management decisions are made.

Tasks

To understand the essence of this work, it is necessaryconsider the tasks and principles of economic analysis. They are negotiated before the start of the research process. There are several main tasks of analysis.

The first of them is to increase the validity, from a scientific and economic point of view, of existing business plans, various company processes. Also, improvements may require the standards adopted earlier to evaluate the performance of the organization. The study also allows for a comprehensive assessment of the implementation of the set strategic programs, as well as the compliance of the main performance indicators with the specified parameters.

Another task of the analysis is to evaluate the effectiveness of the use of material and labor resources, to monitor the fulfillment of the requirements of financial calculations. Also, this work is carried out to identify the number of internal reserves and change their number at all stages of the production cycle. One of the main tasks of the analysis is to check the correctness and effectiveness of decisions that were made earlier by managers.

Object

Basic principles of complex economic analysis are determined for each object. They can be different aspects of the organization's activities. For example, it can be its financial and material standing, activities in the field of supply, marketing, production, finance.

Such work is carried out both for the entire enterprise as a whole, and for its individual divisions, workshops and sections. Depending on the object and purpose of the analysis, a collection is carried outthe necessary information. Therefore, before starting the process, it is imperative to stipulate the purpose of subsequent work.

Information may be collected from internal and external sources. The result obtained is presented to the management in an accessible form. After that, management decisions are made for the object under study, a set of measures is developed to increase the rationality of the use of existing resources.

Varieties

There are several approaches to conducting such research activities. They share the same principles of economic analysis. Types of economic analysis are divided into groups according to different criteria. Most often, internal and external types of research of the economic activity of the object are distinguished.

The type of analysis determines the type of subject that conducts this work. The completeness of the result obtained depends on this. Internal analysis is carried out by special units that are subordinate to the organization. These are functional departments, services. They can conduct the most complete analysis and cover comprehensively all aspects of the company's activities.

External analysis carried out by third parties. This, for example, may be the tax office, banks, creditors or debtors and other competent organizations. This work is carried out in order to establish the financial condition of the company, the liquidity of its assets, solvency. Based on the receivedinformation draw conclusions about the current state of the company, as well as the prospects for its activities in future periods.

Guidelines

There are certain principles for conducting economic analysis. They are mandatory for all types of research. One of the main principles is science. The analysis is carried out in accordance with generally accepted laws of economics. At the same time, available technologies and tools are used that are currently the most effective (for example, computer programs).

Consistency is also important when doing this kind of work. This means that in the course of the study all the regularities of the object's activity are determined. Phenomena are studied in their mutual connection.

The analysis must be comprehensive. The obtained indicators are studied in dynamics to identify trends in their changes. Another important principle is the selection of the purpose of the study. On the basis of this, the corresponding tasks are set. The result obtained should be specific, as well as useful from a practical point of view. It is expressed in exact numbers, indicating the places of occurrence of certain indicators.

Method

Every financial manager must clearly understand and master the principles and methods of economic analysis. This makes his work high-quality and productive. Under the method of economic research, one must understand the approach that is used in a particular case to study the economic activity of an object. There are quite a few of them.

Methods of economicanalysis has a number of features. They allow you to define indicators and systematize them. Based on this information, it is possible to draw the right conclusions about the features of the organization's economic activities.

Also, methods allow you to establish the impact of indicators on each other, their causal relationship. Based on this, factors that influence them are distinguished. The form of interdependence of these causes is determined. Methods allow you to choose techniques for studying such relationships. They quantify this process.

The set of selected methods forms the methodology for analyzing the economic activities of the organization.

Comparison

The basic principles of economic analysis are applied when choosing methods and techniques for conducting research work. One of the main approaches is comparison. It involves the definition of two identical indicators in different periods or at different objects. Next, they are compared. The data obtained is analyzed to determine why one factor differs from another, what influenced it.

Deviations are expressed in absolute and relative terms if a horizontal comparative analysis is carried out. The result can also be compared with a baseline or standard. Vertical comparative analysis allows you to determine the structure of a system or phenomenon.

Comparison can be done using trend analysis. This type of study allows you to determine the relative rate of change of an indicator indynamics over several periods. The comparison is made with the base year or quarter.

Indicators that are the same in terms of volume, cost, quality and structure are subjected to a similar analysis. You also need to compare for the same time periods.

Averages

The basic principles of organizing economic analysis are applicable to all methods and techniques. Otherwise, the result obtained will not be of high value in making managerial decisions. One of the possible methods of studying economic activity is the use of average values. A homogeneous phenomenon can be described by mass data. Average values determine the general pattern of the development of the process.

Group

To study the dependence within a complex phenomenon, the grouping method is used. The characteristics of the factors must be homogeneous in this case. This, for example, can be a characteristic of the workshop in terms of commissioning of each piece of equipment, in terms of shift ratio, etc.

Balance method

The main principles of economic analysis are also applied in the balance method. It allows you to measure two sets of indicators that tend to balance. For example, in the process of studying the provision of an enterprise with material resources, the need for them, the sources for covering these needs are determined. Next, it is determined whether there is a deficit or surplus in production.

After considering the existing methods and principles of economic analysis, we can draw conclusionsabout the peculiarities of conducting research work on the economic activities of the organization.