Economic analysis is a procedure for checking the financial and economic condition of the enterprise. Knowledge and skills of analysis are necessary for economists and managers to assess the financial condition of the enterprise, as well as to develop a strategy for its development in the future for the next few years.
Definition
The concept of economic analysis includes such important phenomena in the activities of an enterprise as an assessment of the effectiveness of the current production work plan. The analysis includes calculations of such important performance indicators of the company as:
- level of return on assets and the enterprise as a whole;
- liquidity of assets;
- the dynamics of changes in turnover, costs and profits;
- assessment of the company's assortment and the share of each product or product groups in total income and expenses.
The subject of economic analysis is the activity of the firm. In the process of conducting the analysis, the financial results of the organization's work are studied and evaluated. Phenomena and factors, both external and internal, that affect the state oforganizations, primarily financial.
Object of study
The content and subject of economic analysis are determined in accordance with the goals and objectives set by the management of the enterprise, as well as the search for solutions to problems that somehow arise before the heads of enterprises.
To ensure the normal operation of the enterprise and the growth of profits, the management of the enterprise must study the basics of economic analysis in order to:
- know the amount of costs that fall on each type of product. This is necessary in order to determine the maximum possible price reduction, taking into account all the costs associated with the production and sale of goods;
- stop the production and sale of those goods that are not in demand, while reducing their prices is impossible, as this will lead to losses;
- set different markups, in accordance with the characteristics of certain types of goods.
This requires the use of such a method of economic analysis as costing. The concept of distribution costs calculation refers to the calculation of the costs of production and sale of certain goods. Determining and calculating the level of income and costs for certain goods basically forms the basis of this method of financial calculations.
Meaning of income and expense calculation
Using costing to meet the goals and objectives of economic analysis can help:
- increase the competitiveness of goodsby lowering prices for certain types of goods and services;
- identify and select the most profitable products;
- determine the minimum margin at which the release and sale will generate income;
- reveal a list of unprofitable goods and product groups. Calculation will help to identify such goods and make a decision: whether it is necessary to take measures to increase their profitability or exclude them from circulation;
- determine the most optimal prices for individual goods or groups of goods.
The use of economic analysis in large and medium-sized enterprises makes it possible, by changing the trade margin, to achieve income growth and cost reduction for individual goods or groups of goods. Thus, increase your efficiency.
Tasks
When conducting a comprehensive economic analysis of the economic activity of an enterprise, the following important questions should be answered:
- what products does the company produce;
- how the demand for goods is met;
- what activities does the organization take to increase the pace and volume of sales, reduce the cost of products and improve their quality.
What kind of answer will be received depends on what methods will be used in the analysis process. Also - what objects of economic analysis have been studied. To do this, you need to:
- Checking the implementation of the production plan and the sales plan. Determine how much consumer demand forcertain goods are satisfied, how well the plan has been fulfilled, what are the further prospects for expanding sales markets;
- study of factors affecting the implementation of the production plan, the plan of turnover, output and growth (decrease) in sales;
- search for opportunities and reserves to improve the efficiency of the company;
- development of new, more advanced management solutions for the development of the company, the creation of more realistic plans.
In the process of economic analysis, various sources of information are used: business plans, financial and accounting reports and statements, time sheets and production plans.
Procedure for analysis at the enterprise
Comprehensive economic analysis of the company's economic activity makes it possible to establish the main qualitative and quantitative indicators of activity in this and future periods.
On how well the work was done depends on how correctly, based on the results of the analysis, the work plan for the next few years will be developed. Errors in calculations can lead to a deterioration in the economic situation of the company and even cause bankruptcy. The entire analysis process is usually divided into several stages.
Where it all begins
At the first stage, this type of economic analysis is used, such as determining the total volume of goods and services produced by an enterprise for a certain period. After analyzing and evaluating the implementation of the previous plan, a new production plan is developed. At this stage, the overalloutput and sale of goods. Accounting is kept both in monetary and in-kind (by commodity) terms.
The degree of implementation of the plan is determined by comparing the relative and absolute size of the deviation from the previously developed plan. Also at this stage of the economic analysis, the influence of factors that could not be taken into account, but affected the financial result, is assessed. For example, the failure of production equipment, which led to a delay and a decrease in production.
Second stage
At the second stage, the object of economic analysis is the total production indicators over a long period (over several years), determining their status and growth (decrease). Growth dynamics of produced goods and services at current prices (ATT) is calculated by the formula:
ATT=Actual release (sale) of goods of the reporting year at current prices100/Actual release of goods of the previous year.
A feature of economic analysis in this case is that based on the data obtained during the study of dynamic changes in the level of sales of goods, the dynamics of sales in relation to previous periods is determined.
Determining the volume of sales compared with Tsc prices is carried out according to the following formula:
Tsc=Tf/Itz, where Tf is actually produced and sold products for one specific period;
Itz is the average index of price changes for goods sold over the same period compared to the previous one.
Average price change index is calculated taking into account the assortmentgoods and available information about price changes for certain goods or groups of goods.
A special place in planning and management also has a definition of the average level of growth in the volume of sales of goods according to the formula:
T=√Uh/Wo, where T is the average growth rate;
Uh - sales volumes at the end of the study period;
Yo - sales volumes at the beginning of the study period.
Based on the calculations obtained, absolute changes in the total volume of goods sold relative to the main and previous periods are determined. The rate of increase (decrease) in sales growth dynamics is determined.
Third stage
During it, such a type of economic analysis is carried out as an analysis of the product-group assortment of goods sold for the reporting period, determining the dynamics of growth (decrease) in sales and identifying patterns of these changes. Parameters such as:
- state of markets for manufactured products;
- change in demand for goods and services sold by the enterprise, decline in production and sales growth, changes in tax legislation that led to an increase in production and sales costs;
- shortcomings in the work of personnel and sales of goods, errors in calculations during planning;
- output volumes and dynamics of their growth;
- reasons for changing product mix and sales volume.
Studying the range of manufactured and sold goods allows you to group goods bythe degree of their importance in the overall turnover of the enterprise. It also makes it possible to adequately assess the dynamics of sales of certain products and the possibility of increasing sales in the future.
Fourth stage
As the goal of economic analysis, this step examines the composition of goods produced and sold by the enterprise, the dependence of the assortment on factors such as:
- customer preference;
- forms and terms of payment;
- characteristics of manufactured and sold goods. The way the production and marketing of products is organized.
The study of these factors, their evaluation and analysis enables the manager to anticipate the results of actions and identify patterns that occur during the sale of goods and services in a certain way. For example, when selling goods to the public or small wholesalers, with immediate payment or in installments, with cash and non-cash payments.
In the process of research, different categories and volumes of goods and services are compared with each other. This is done in order to identify the dynamics of the goods produced by the enterprise, both in general and in commodity terms. This type of economic analysis is referred to as comparative analysis. As a result, the goods and groups of goods that have the greatest weight in the total volume of trade and their impact on the financial result are identified.
Fifth stage
At the fifth stage, the volume of sales of goods and services is calculated quarterly and monthly. At this stage, a type of economic analysis is applied, such asstudy of the rhythm of sales and the study of factors that affect this parameter.
During the analysis, those indicators are calculated that characterize the rhythm of sales.
G=Summ(Xi-X)2/n, V=G100/x, Where Xi is the turnover for the i-th period;
X – average volume of goods sold over n periods;
n is the number of months or years for which data were taken for the study.
The calculated deviation (G) determines the level of fluctuation in the sale of goods, that is, the minimum and maximum volume of the company's products sold over the entire period of the study.
The coefficient (V) of variation shows how evenly the sale of goods occurred during the entire study period.
The results obtained during the analysis make it possible to assess how evenly the sale of goods took place by months and quarters. Determine the causes of interruptions and irregularity. Find solutions to identified problems.
Sixth stage
During the sixth stage, such type of economic analysis as factorial is used. At this stage, the factors that affect the volume and range of goods sold are studied, a quantitative assessment is made of the influence of factors associated with such indicators: the demand of buyers for manufactured goods, the supply of goods on the market, the standard of living and real incomes of the population that is served, and many others.. Both external and internal factors are considered. For economic analysis at this stage are used as sourcesinformation primary documents of the enterprise and statistics data.
Final stage
This is the completion of the analysis of the enterprise. This includes a study of the financial strength of the firm, which determines the possible decline in sales and revenue decline in relation to the previous period and determine its level relative to the “break-even point”. This stage is of particular importance in economic analysis, as it makes it possible to determine the likelihood of bankruptcy, as well as to find ways to improve the financial condition of the enterprise.
The minimum level to which the volume of income can be reduced characterizes the trade organization's safety threshold (PBTO) and the financial safety margin (FFS). Their values are calculated like this:
PBto=Tf – Tb.z, ZFPto=Tf/Tb.z, where Тf is the actual income of the enterprise;
Tb.z - the amount of income and expenses at which break-even activity is ensured.
The higher the value obtained as a result of the calculation, the higher the financial safety margin and the lower the probability of bankruptcy. Economic analysis makes it possible to improve the process of enterprise management, identify weaknesses and shortcomings in the production and sale of products. Helps to find new ways to increase income and reduce costs, the formation of the optimal assortment.
Cost Analysis
Costs are the costs of the enterprise for the production and saleproducts. As a direction of economic analysis in economic science, it is customary to divide costs into fixed and variable. They can be analyzed both separately and together. The first method is considered the most accurate, but the second method is often used to simplify the process.
The peculiarity of the factor analysis of expenses for the production and sale of goods is that not all expenses of the enterprise are related only to production and sale, but they should be taken into account when conducting an economic analysis. In accounting, they are called other expenses and are charged to separate accounts.
The main model of factorial cost analysis is a multiplicative model of the dependence of costs on the volume of products sold, which is calculated using the following formula:
I=UiNo, Where AND - the amount of costs;
Ui – spending level;
No - total sales revenue.
This calculation model is used to determine:
- turnover:
∆I(N0)=∆NUi;
- cost level changes:
∆I(Ui)=∆UiNo.
According to the results of the analysis, the company's pricing policy is developed, based on the principles of pricing, taking into account the calculations made, and the range of manufactured and sold goods is determined, which can bring the maximum level of profit.
Analysis of enterprise profits
In terms of economic analysis, profit is defined as the difference between gross income and expenses for the production and sale of products. On the other hand, gross incomedefined as income from the sale of goods net of VAT.
Gross income is usually calculated on the basis of the financial statements "Profit and Loss Statement" as the difference between revenue and selling expenses. Gross income is calculated as the product of income from sales of products and the level of gross income:
VD=N oAvd/100%.
He is the main price indicator. By changing the markup on the produced and sold goods, the company can increase or decrease the volume of demand, choosing the indicators of the most optimal combination and the highest gross income. However, one should not forget about the importance of such a factor as the size of the costs of production and sale of products. The factor model of economic profit analysis in this case is calculated by the following formula:
P=No(Atc - Ui)/100b
where Ui is the cost level.
Economic cost analysis is essential to create realistic business plans. It should also be carried out when making certain management decisions, for example, when forming an assortment, pricing, expanding fixed assets.
Assessment of financial condition
Based on the above calculations carried out during the economic analysis, the financial condition of the enterprise, the level of production profitability are assessed, and further ways of its development are determined. The financial condition is assessed, first of all, due to the ratio of profit for the current period relative to the previous one, and also based on the ratioproduction costs and income. A decrease in sales dynamics, both in kind and in monetary terms, is considered a bad sign.
When conducting an analysis, statistical and mathematical methods are used, calculations are made, models and a business strategy are built. The classification of types of economic analysis according to various criteria is based on accounting and management accounting data. Usually, at each stage of the analysis, certain documented data are processed using the tools appropriate for each stage.
The above analysis procedure and formulas are suitable for both a small business, such as a retail store, and a large one. The difference lies only in the amount of data received, which will need to be grouped, and then calculated and analyzed.
The use of special methods of economic analysis makes it possible to study the dynamics and determine the state and ways of development of the company in the future, justify on the basis of materially confirmed information to create realistic plans for the growth of production and sales of products. The result of applying these methods is the correct assessment and accounting of reserves, production capabilities, market conditions and one's own competitive advantages or disadvantages.
