what are the measures of financial efficiency hello i'm rachel jones and this is kalki media's
educational series now a company's financial analysis allows it to determine its current state
opportunities and also problems this valuable information is used both for making current
management decisions and for strategy development the analysis of financial performance is one
of the methods for assessing the state of an enterprise and its capabilities in the future
it serves as a basis for strategic planning it helps managers identify resources and
areas of further development and it finds strengths and weaknesses
analysis of financial ratios is carried out to identify the best
ways to achieve the company's objectives such as increasing business activity asset turnover
ensuring liquidity and financial stability and also increasing the company's profitability
the analyst must understand a variety of figures from accounting and management reporting to
be able to determine the effectiveness of the current activities more than 200 ratios are used
in financial analysis they're all characterized by the four main sides of the company's activity
which are liquidity that is the company's ability to pay its obligations at the expense of current
assets the liquidity ratios allow to estimate it adequately next is asset turnover which allows
us to evaluate the effectiveness of asset and capital management of the enterprise
the basis for turnover calculation is revenue from sales of products or services
its ratio to the average annual amount of assets accounts receivable and accounts payable
next is profitability ratios which reflect the degree of profitability of an enterprise
they're calculated as the ratio of profit to the indicator's value the profitability of which we
find the higher the values the more effectively the resources are used and lastly there's market
value which makes it possible to conclude how the market assesses the efficiency of financial
and economic activity of the company the rationality of its dividend policy and most
importantly its attractiveness for shareholders or investors now they may differ depending upon
the analysis objectives to conduct an adequate analysis of the financial performance of an
enterprise it's necessary to ensure you should have a complete description
of the company's financial activities for the period under analysis next you can compare the
ratios for different periods as well as with the average statistical values in the industry
next compare the values obtained with the recommended considering the specifics of
the company's economic activity and finally carry out the analysis of indicators as a whole
to get the objective picture it's necessary to analyze the indicators of different groups
turnover financial stability and profitability the competent analysis will allow to correctly build a
development strategy improve the concepts of asset management and the attracted funds of the company
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