Financial accounting analysis is a process through which a commercial institution’s profitability is gauged. This also means an examination of the stability and the viability of the company or even a particular project attached to the company. This analysis is done mostly by experts who are required to create reports on the data that has been collected from various financial statements and relevant reports.
This is done so as to present it either to the Board of Directors of a company for assessing capital and profit, to a lawyer for taxation purposes or to the Bank for loan purposes. The results from the analysis help decide on whether to carry on with the business, to collect more resources for the particular production project or to acquire new machinery for the production. This also helps the company decide whether or not to issue more stocks or increase working capital by applying for a loan.
Sample Financial Accounting Analysis
Company Name: Radicals R US Co.
Financial Accountant Company hired: YYUS Finances Ltd
Project: Production of Sun P2k Cell Phone (Batch no.: 22311)
Aim of this paperwork: To restart production of the above mentioned cell phone model.
Reasons for Analysis:
- First batch of production has completely sold out.
- To understand the profitability of a second round of production.
- To assess risk factors associated with the second production.
- To gauge financial status of the company.
- To analyze the market conditions for the sale of the stated product.
- The second Production will mean 20 % increase in the capital used from the previous production.
- Liabilities associated with this production are greater than the assets of the company.
- Taxation clauses remain the same which means a second round of taxes to be filled.
- Market interests have shifted considerably since the first production.