Analysis of financial statements. Types of analysis of accounting (financial) statements
Federal Penitentiary Service
Academy of Law and Management
Department of Accounting, Analysis, Finance and Taxation
Institute for the training of state and municipal employees
Full-time education
Direction 080100.62 - Economics
Course work
Assessment of indicators of financial statements
Prepared by:
4th year student
study group
Begletsov V.Yu.
Checked:
A.A. Tarasov
Ryazan, 2014
Introduction
3 The volume of accounting (financial) statements
Conclusion
Introduction
financial statements profit balance
In its activities, each organization, represented by its leadership, carries out a variety of business operations, makes certain decisions. Almost all such transactions are reflected in accounting.
Data on business transactions that are carried out by an economic entity for a certain period of time are summarized in the relevant accounting registers, and then transferred in a generalized form to the financial statements. Such a procedure for grouping accounting information is necessary, firstly, for the organization itself and is associated with the need to clarify, and in some cases adjust the further course of the financial and economic activities of a particular enterprise.
The financial statements should reveal many facts that may affect the assessment of users of information about the state of property, financial situation, profits and losses. In this regard, the importance of the role of assessing the indicators of financial statements, that is, an integrated, systematic approach, or studying the financial position of an organization and the factors of its formation, in order to assess the degree of financial risks and predict the level of return on capital in the future, increases significantly. This makes it possible to objectively assess the influence of factors on its main indicators of economic and economic activity.
Information on the property and financial position is disclosed in the balance sheet, on the financial results of the economic activity of the enterprise - in the income statement, on the solvency and origin of money capital - in the cash flow statement.
At the end of each reporting period, the head of the organization reviews, studies and analyzes the financial documents of his accounting department based on the results of work. The ability to analyze them correctly allows him to make competent management decisions, which in the future can increase the dynamics of the enterprise's development.
The purpose of this course work is a complete, comprehensive and comprehensive assessment of accounting indicators, in particular the balance sheet and income statement.
The objectives of the course work for the solution and achievement of the set goal are:
establish the meaning of financial statements and determine its main types;
to establish users of accounting (financial) statements;
consider the scope of reporting;
identify the reporting period and the reporting date of the financial statements;
determine the main elements of the structure of the balance sheet;
consider the assessment of the balance sheet and income statement.
The object of this course work is accounting (financial) statements.
The subject in the course work will serve as indicators of the balance sheet and income statement.
Theoretical aspects of accounting (financial) reporting
1 Definition of the concept of "financial statements", its types and meanings
Accounting (financial) statements are information about the property and financial position of an organization, the financial result of its economic activities and cash flows for the reporting period, compiled on the basis of accounting data and in accordance with established forms.
Each non-governmental organization seeks to maximize profit in a market economy. This focus is specific and essential for their activities. The basis of the financial statements of organizations in the market conditions is the compilation and formation of reporting indicators for external users. Consequently, accounting is an essential prerequisite for the development of business relationships of many participants in the market system. Lack of information in the future may affect, for example, a decrease in the inflow of additional capital, because it is a means for expanding, firstly, the financial activity of an economic entity.
Also, accounting data is required by the management of the organization for making management decisions and coordinating activities.
The main objectives of reporting are as follows:
Compliance with the basic rules and principles of accounting by organizations in the preparation of reports to obtain reliable information.
Preparation of financial statements by all business entities of different organizational and legal forms.
Compliance with international reporting standards, especially for those that are of interest to foreign investors.
Disclosure and explanation in the financial statements of other accounting methods and methods adopted in the accounting policy of the organization.
The Concept for the development of accounting and reporting in the Russian Federation for the medium term envisages the creation of such types of reporting by economic entities, depending on users, such as:
Individual accounting reports.
Consolidated financial statements.
Management reporting.
Tax reporting.
Individual financial statements have two functions:
Informational.
Control.
First, it speaks about the financial position and the economic result of the organization's economic activities. Secondly, this reporting monitors the accuracy of the accounting cycle.
Individual accounting reports are needed for:
) determining the final financial result - net profit (loss) and its distribution among the owners;
) submitting it to the supervisory authorities;
) determining the signs of bankruptcy of economic entities;
) application in taxation and in the management of the organization.
Consolidated financial statements are a type of financial statements. It is needed to determine the financial position and the result of the activities of a group of economic entities based on control relations. Consolidated reporting performs only an informational function and is presented to external users interested in it. For making management decisions in the organization, these statements can be used as a source of financial information.
Interested users in the consolidated financial statements should find reliable, reliable and comparable information about a group of economic entities. In turn, these statements are drawn up in accordance with international standards, and a statutory audit is also carried out.
Management reporting is necessary for use in the management of an economic entity either by management or other management personnel. Therefore, its content, frequency, forms and terms of compilation are determined independently by the economic entity. Also, this reporting should preferably be based on the same principles as individual and consolidated reporting, for its usefulness and effectiveness.
Tax reporting (tax returns) is needed for fiscal purposes and is mandatory for compiling by economic entities, the range of which is established by tax legislation. Its main task is to reduce the cost of its formation by converging the rules of tax accounting to the rules of accounting.
In addition, economic entities must submit statistical reports, which are compiled on the basis of accounting and operational records. It is formed according to the rules established by the Federal State Statistics Service, and is designed to collect and process information on mass economic phenomena.
In addition to the listed types of reporting, joint-stock companies may submit specialized reporting to the Bank of Russia Financial Market Service under the leadership of the Government of the Russian Federation, and unitary enterprises - to the Federal Agency for State Property Management under the jurisdiction of the Ministry of Economic Development of the Russian Federation.
Financial statements can be classified according to various criteria: Depending on the destination:
) internal (managerial) - for managers of different levels of management;
) external (financial) - for external users .. Depending on the compilation period:
) current (intermediate) - a component on an accrual basis from the beginning of the year (quarter, half year, 9 months);
) annual - compiled for a calendar year and includes the final indicators of the organization's activities .. By the degree of detail:
) general - characterizes the activities of the entire organization;
) special - characterizes information in one area of the organization's activities .. By the degree of generalization:
) individual (single) - includes indicators of a separate organization, division, allocated to a separate balance sheet.
) consolidated - covers the indicators of a legal entity, including branches and divisions allocated to a separate balance sheet.
) consolidated - discloses information about a group of related organizations, each of which may be a separate legal entity.
2 Users of accounting (financial) statements
The work of research and analysis of financial statements must satisfy many requirements. Everyone who uses information about the organization does it in different ways, in accordance with their competence and their understanding. In PBU 4/99, the user of financial statements is defined as an individual or legal entity interested in information about the organization.
Financial reporting in the Russian Federation is of interest to both external and internal users.
External users.
Users who are directly interested in the activities of the organization.
Users who are indirectly interested in it.
The first group of external users includes:
) the state (first of all, represented by the tax authorities, who check the correctness of the calculation of taxes, the preparation of accounting documents);
) lenders who determine the terms of lending, assess the feasibility of granting or extending a loan or the credibility of the organization as a client;
) buyers and suppliers who determine the strength and sustainability of the business relationship;
) shareholders or owners of funds of an economic entity, who determine the dynamics of the share of personal funds, and also assess the efficiency of resource allocation by the management team of the organization;
) freelance workers who are interested in reporting indicators in the context of salary.
The second group of external users includes:
) audit organizations that check the accuracy of financial statements in accordance with the established rules and regulations;
) employees of organizations on financial issues who use reporting data to develop proposals for their clients in the sale of equity capital of a particular organization;
) securities exchanges that analyze reports during the registration of these organizations, making a decision to suspend or terminate the activities of an economic entity, assessing the need to change accounting methods;
) government departments;
) employees of legal services and companies who need reporting data to analyze compliance with the rules of law in the distribution of profits and payment of dividends to shareholders, fulfillment of the terms of contracts;
) mass media that use reporting data to create press releases, analytical programs, analysis of the dynamics of development of individual organizations;
) state statistical organizations (for example, the Federal State Statistics Service), which use reports to generate official statistical information on various industries;
) trade union organizations that are interested in accounting data to determine their positions in the field of improving the working conditions of employees of the organization (for example, in the field of wages, labor relations, working hours, provision of benefits, etc.).
Internal users:
) the management staff of the organization;
) the heads of the relevant departments and divisions, who determine, in accordance with the financial statements, the correctness of the economic or economic decisions taken, the effectiveness of the capital structure, forecasts of financial indicators for the upcoming reporting periods.
1.3 Scope of accounting (financial) statements
Order of the Ministry of Finance of the Russian Federation dated 02.07.2010 No. 66n "On the forms of financial statements of organizations" includes appendices, which are the approved forms of financial statements. They differ from the previous version of the forms, as they are designed to qualitatively improve legal regulation in the field of accounting, excluding credit organizations and state (municipal) institutions.
The standard annual financial statements, following the Law on Accounting, PBU 4/99, as well as the order of the Ministry of Finance of the Russian Federation of July 2, 2010 No. 66n, include:
Balance sheet.
Profits and Losses Report.
Statement of changes in equity.
Cash flow statement.
Explanations to the balance sheet and income statement, which are presented in the form of tables.
Report on the targeted use of the funds received.
Information accompanying financial statements (explanatory note).
Audit report. (If this economic entity is subject to mandatory audit in accordance with the Federal Law "On Auditing" dated December 30, 2008 No. 307-FZ)
During the preparation of reports, the organization must reflect all changes that have occurred during the reporting period: for example, changes in accounting policies that have or are likely to have an undeniable effect on the economic situation, cash flow or financial results in the activities of the economic entity itself; operations in foreign currency; about fixed assets; about inventories; about the income and expenses of the organization and so on.
An economic entity has the right to provide additional information that will accompany financial statements if the state executive body considers it necessary for users when making financial and managerial decisions. It can reveal the dynamics of important economic indicators over several years; possible long-term financial investments; environmental protection measures; predictive development of the enterprise and other information.
4 Reporting period and reporting date for accounting (financial) statements
In accordance with the national rules of the Russian Federation, the reporting year for absolutely all economic entities is the calendar year - from January 1 to December 31 inclusive, and the reporting date is a certain date, as of which the organization is obliged to prepare reports. The last calendar day of the reporting period is the reporting date for the preparation of financial statements.
The first reporting year for newly created organizations is the period from the date of state registration to December 31 of the current year. But there is an exception for enterprises created after October 1: for them, the first reporting year will be the period from the moment of their state registration to December 31 of the next year.
Monthly and quarterly reports are compiled on an accrual basis from the beginning of the reporting period.
It should also be noted that international financial reporting standards do not establish specific deadlines for the preparation of the organization's annual financial statements. The IASB is not a governmental organization, so it has no authority to lay down any binding rules or regulations on this topic. In any country, certain reporting periods are established by national legislation or by the authorities that regulate the securities market.
Assessment of indicators of accounting (financial) statements
1.1 Formation of balance sheet asset items
In the active part of the balance sheet, the debit balances of the general ledger accounts are indicated. Asset items are grouped into two sections.
Non-current assets (total line 1100).
a) intangible assets (line 1110). They are recorded in accordance with the requirements of PBU 14/2007 "Accounting for intangible assets".
They include objects that simultaneously meet certain requirements:
the ability to bring economic benefits in the future;
useful life is more than 12 months;
availability of the right to receive economic benefits;
no further resale is expected;
the lack of material and material form of the object.
Intangible assets may include: works of science or art, scientific inventions, computer programs, secret developments (know-how), trademarks.
In the balance sheet, intangible assets are accounted for at their residual value (the difference between the original cost and the amount of accrued depreciation). The initial cost is accounted for on account 04 "Intangible assets".
b) the results of research and development (line 1120). This article reflects information on the costs of completed research, technological and development work on the debit of account 04. R&D includes the cost of inventories for these works; costs of salaries of employees; deductions for social needs; depreciation of fixed assets.
c) intangible search assets (line 1130). This article reflects information on the costs of searching, evaluating deposits of any minerals, sampling and conducting soil analyzes. This data is recorded on account 08.
d) tangible search assets (line 1140). This article reflects information on the amount of costs for structures, buildings, equipment, vehicles that are used in the process of prospecting, appraisal of deposits and exploration of minerals. They are accounted for on account 08.
e) fixed assets (line 1150). This article reflects information about the objects of fixed assets, which are accounted for in the debit of account 01. Fixed assets are characterized by the following conditions: participation in the production process or providing for economic needs; useful life exceeds 12 months; next resale is not expected; the ability to generate income in the future. Fixed assets in accordance with PBU 6/01 include buildings, structures, machinery and equipment, devices, computers and others.
f) profitable investments in material assets (line 1160). This item reflects the residual value of the property, which is intended for transfer under a financial lease (leasing) agreement. It is reflected in the debit of account 03, and the amortization amount is on account 02.
g) financial investments (line 1170). This article reflects information on financial investments with a maturity of more than a year after the reporting date. These include: contributions to the authorized capital of other organizations; state and municipal securities; investments in subsidiaries and affiliates; receivables. They are accounted for in the debit of account 58.
h) deferred tax assets (1180). This item reflects that part of the deferred income tax, which should lead to a decrease in income tax in the next reporting period. They are accounted for in the debit of account 09. These data as of the reporting date must be equal to the values of article 2450 "Change in deferred tax assets" of the income statement.
i) other non-current assets (line 1190). This article reflects R&D that did not give a positive result (debit 08 accounts); equipment requiring installation (debit 07 account); perennial plantations that have not reached the operational age (debit 01.5 of the account) .. Current assets (total line 1200).
a) stocks (line 1210). This article reflects information on the remains of raw materials and materials (account 10); animals for growing and fattening (account 11); balances in work in progress (account 20); finished products (account 43); goods shipped (account 45) and the like.
b) value added tax on acquired values (line 1220). This article reflects information on the amount of input VAT, which was presented to the enterprise by counterparties for payment when purchasing goods, works, services. This tax is accounted for on account 19.
c) accounts receivable (line 1230). This item reflects information on the total amount of receivables. For example, this account may include amounts such as overpaid taxes (account 68), the amount of indebtedness of the employee for damages (account 73), penalties (account 76), and the like.
d) financial investments (excluding cash equivalents) (line 1240). Under this item, account 58 reflects securities with a maturity of less than a year; loans issued to other organizations and individuals for up to a year, and so on.
e) cash and cash equivalents (line 1250). Under this article, data on the funds available to the organization presented on accounts 50, 51, 52, 55, 57 are indicated.
f) other current assets (line 1260). This article takes into account the completed stages of work in progress (debit 46 of the account); the amount of VAT charged from the advance and prepayment (debit 62 of the account); the amount of excise taxes to be deducted in the future (debit 68 of the account).
1.2 Formation of items of liability balance
The liabilities of the balance sheet reflect the credit balances of the general ledger accounts. Liabilities items are grouped into three sections .. Capital and reserves (total line 1300).
a) authorized capital (share capital, authorized capital, contributions of partners) (line 1310). This article reflects the amount of the authorized capital registered under the credit of account 80.
b) own shares repurchased from shareholders (line 1320). This article reflects information on the value of shares purchased by the company from its employees. They are reflected by the posting: debit 81 of the account and credit 50 (51) of the account.
c) revaluation of non-current assets (line 1340). This item reflects the balance of account 83, which was formed as a result of revaluation of fixed assets (PBU 6/01), revaluation of intangible assets (PBU 14/2007). Additional capital can be used to depreciate fixed assets, intangible assets, if these objects were previously subject to revaluation, therefore, a source for their subsequent depreciation was already available.
d) additional capital (without revaluation) (line 1350). This article reflects information on exchange rate differences; excess of the par value of the share over the market value (credit 83 of the account).
e) reserve capital (line 1360). This item reflects information on the amount of the reserve capital intended to cover extraordinary losses of the joint-stock company. This capital must be formed in an amount that will be greater than or equal to 5% of the authorized capital. Posting for the formation of the reserve capital: debit 82 of account and credit 84 of account.
f) retained earnings (uncovered loss) (line 1370). This item reflects data on the amount of profit / loss remaining after the distribution of profit or coverage of the loss of the reporting year. These data as of the reporting date must be equal to the values of item 2400 "Net profit of the reporting period" of the profit and loss statement. Net income is the difference between profit before tax, current income tax and "other" taxes and penalties. At the end of the year, net profit is written off from debit account 99 to debit account 84 .. Long-term liabilities (total line 1400).
a) borrowed funds (line 1410). This article reflects information on long-term loans and borrowings, which were attracted by the enterprise, with a maturity of more than 12 months (account 67 credit). Loans, bank loans can be taken into account here.
b) deferred tax liabilities (line 1420). In accordance with PBU 18/2002, deferred tax liabilities mean that part of the amount of deferred income tax, which in the next reporting periods should lead to an increase in income tax payable to the budget. The transaction for this item is debit account 68 and credit account 77. These data as of the reporting date should be equal to the values of item 2430 "Changes in deferred tax liabilities" in the income statement.
c) estimated liabilities (line 1430). Estimated liabilities - liabilities associated with upcoming payments of vacation workers, warranty service, payments to the budget by organizations that have committed violations of the law (credit 96 accounts).
d) other liabilities (line 1450). This item reflects the debt, the maturity of which is more than a year. It includes the receipt of an advance payment for the receipt of products (credit 62 accounts), deferral / installment plan for the payment of federal taxes and fees (credit 68 accounts), debt to off-budget funds (credit 69 accounts) .. Short-term liabilities (total line 1500).
a) borrowed funds (line 1510). This item reflects information on the debt on outstanding loan obligations, the maturity of which is less than a year, including accrued interest.
b) accounts payable (line 1520). This item reflects information on short-term accounts payable, the maturity of which is less than a year. This can include outstanding debts to suppliers and contractors for the supplied materials or work performed (credit 60 accounts), debts to the personnel of an economic entity in the form of unpaid wages or other payments in favor of employees of the organization (credit 70 accounts), debts to state extra-budgetary funds (credit 69 accounts), debt to the budget in the form of not listed taxes and fees (credit 68 accounts).
c) deferred income (line 1530). This item reflects information on the amount of income that was received in the reporting period. They will be reflected on account 98 and include:
the initial cost of fixed assets that were received for free use;
budgetary funds that are directed by a commercial organization to finance costs.
d) estimated liabilities (line 1540). This item reflects information on the amount of estimated liabilities that must be repaid within a year after the reporting date. These obligations are formed on account 96 and will be accounted for in accounting if certain conditions are simultaneously met:
the organization has an obligation that it must fulfill;
reduction of economic benefits for the enterprise, going towards the repayment of its obligations;
the estimated liability can be determined.
e) other liabilities (line 1550). This article may reflect such indicators as targeted financing that was received by the organization from the investor, as a result of which an obligation is formed to transfer the suspended object to them within a year (credit 86 accounts); the amount of value added tax that has already been accepted for deduction when transferring an advance and is payable to the budget upon receipt of the goods upon delivery (account 76 credit).
2 Assessment of indicators of the balance sheet and income statement
After collecting and processing information, any organization is aimed at analyzing the obtained indicators in the accounting (financial) statements for further forecasting the dynamics of the company's development or making strategic and balanced management decisions.
First, there is always an analysis of the balance sheet indicators, since it is one of the main forms of financial reporting and contains the basic information of the organization: property, liabilities and other facts of the organization's economic activity.
In the asset of the balance are the means of the organization, which always go through a continuous cycle of supply, production, and sales processes. The funds of the organization are divided into circulating and non-circulating assets, because they take different part in the circulation of funds.
Current assets most often go through the following stages of being in the organization: raw materials / materials / semi-finished products à finished products à sale of finished products à cash from the sale.
Non-current assets also go through a certain cycle: property à operating it for a long period of time à gradually wears out à it is included in the circuit in parts by means of depreciation.
The structure of the balance sheet asset was compiled according to a certain system, which included in its basis the degree of mobility of property liquidity. In the balance sheet of the Russian Federation, all assets of an asset are arranged in order of increasing liquidity.
The liabilities of the balance include sources of funds or liabilities of the organization. There are obligations to the owners of the organization and to third parties (creditors, banks). This division has a certain meaning in determining the maturity of repayment. We can say that obligations to owners constitute a permanent part of the balance sheet, and they can be permanently not repaid. But obligations to creditors or banks must be repaid at certain periods in time. In Russian practice, items in the balance sheet liabilities are arranged according to the degree of increasing maturity of obligations, therefore, all of the above determines the entire structure of the balance sheet liabilities.
The main goal of economic agents in a market economy is to maximize profit from their activities. Therefore, any enterprises and companies engaged in entrepreneurial activities, it is vitally necessary to analyze the indicators of the income statement for further informed decisions. After all, profit for them is absolutely everything.
The main purpose of this report is to provide stakeholders with information about the results of the organization's business. This information can be applied in different cases. For example, when assessing the effectiveness of management staff, distribution of income / dividends between founders / shareholders, forecasting the future activities of an enterprise.
The very significance of this report is generally difficult to overestimate when assessing and analyzing the profitability and profitability of an organization. Since the overall financial result in the report is quite detailed, this information can already be judged on the change in the income and expenses of the organization in the reporting period in comparison with the previous ones, on the composition and structure of gross profit, profit from sales, net profit. The report also helps to analyze the dynamics of production costs and sales of products, works, services, sales proceeds.
The data contained in the income statement is still used in the calculation of several ratios that characterize the business activity and profitability of the organization. To assess business activity during the calculation of turnover ratios, the revenue (net) indicator from the sale of products is used.
After summarizing all the results of the analysis, you can find out the unused opportunities to increase the profit of the enterprise, to increase the level of its profitability. The information contained in this report will help all stakeholders to make a conclusion about how effective the activities of this organization are, and whether investments in its assets will be justified.
Conclusion
I would like to emphasize once again that it is very important to most fully and reliably state the necessary information in the financial statements. Failure to apply these requirements and guidelines can lead to very significant negative consequences, both for the enterprise itself and for interested persons and organizations - creditors, shareholders and others.
It should be noted that the analysis of the assessment of accounting indicators is necessary not only for the organization itself, but also for interested parties - creditors, buyers, suppliers and others. The use of financial statements in the course of the assessment allows you to accurately and reliably assess the financial position of the organization, and possibly the future partner.
The main goal of an economic entity in market conditions is to maximize profit, which is impossible when there is no effective capital management.
The search for reserves, where necessary, to increase the profits of the organization is always carried out by the heads of enterprises. In general, the result of the enterprise's activities depends on the effective management of economic resources.
In the development of the processes of change in the economy of the Russian Federation, one of the main places is assigned to the improvement of the domestic system of accounting and reporting.
Its capabilities contain a large range of economic entities that participate in the market system, provided with any indicator characterizing the economic, financial or investment activities of a non-governmental organization.
The effectiveness of this activity mostly depends on the reliability and transparency of the information.
Otherwise, the analysis of reporting indicators carried out on the basis of this very information will no longer be accurate and implausible, and it will no longer be possible to use it in the future activities of the organization and for other reasons.
List of used literature
2. On the approval of the Accounting Regulations "Financial statements of the organization" PBU 4/99: order of the Ministry of Finance of Russia dated July 6, 1999 No. 43n // SPS "Garant". Regulation on accounting "Financial statements of the organization" PBU 4/99.
Accounting financial statements: textbook / ed. A.I. Nechitailo [and others]. - Rostov n / a: Phoenix, 2012.
Accounting (financial) statements: textbook. manual / ed. Yu.I. Sigidov, A.I. Trubilina M .: INFRA-M, 2012.
Accounting (financial) statements: textbook. manual / ed. V.A. Oksanich M .: INFRA-M, 2013.
Accounting (financial) statements: textbook. manual for stud. universities / ed. T.Ya. Neteprova, O.V. Trubitsina M .: Dashkov and Co, 2011.
Accounting (financial) statements: textbook. manual for students., training. by spec. "Accounting, analysis and audit" / ed. N.V. Generalova, V.A. Bykova et al. M .: Master, 2009.
Accounting (financial) statements: textbook. manual for stud. universities / ed. V.A. Chernov M .: UNITY-DANA, 2007.
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Based on the financial statements of a certain period, it is possible to draw conclusions about the profitability of the enterprise, the correctness of the applied management strategy, the general financial position, and also make the necessary decisions on effective management.
A qualitative analysis of financial statements is a key point in making management decisions. Actually, this is what financial statements are intended for. Its analysis helps not only to determine the financial condition of the organization at a certain moment, but also to identify its profitability, importance in the overall economic structure, and also to make important forecasts of its functioning, which helps to determine the management strategy.
There are different types of analysis, but they are all aimed at objectively assessing the situation that has developed in the process of work, as well as taking measures to improve it in the event of a decline in economic profitability. Or, maintain good performance, as well as take steps to grow and maximize profit from the selected activity.
Main types
The main and basic types of accounting analysis include external and internal. The names speak for themselves. External and internal reporting is used, respectively.
An example of the analysis of the financial statements of an external enterprise is the analysis that is carried out by investors and creditors. For their own benefit, they must conduct an objective assessment of the enterprise in which they will invest their money in the future. A competent analysis will help you choose the most profitable investment options that will bring profit in the future.
In the case of an illiterate analysis, it is possible not only not to make a profit, but also to be at a loss if the invested company has negative development trends and may turn out to be bankrupt in the future.
Internal analysis allows you to give an objective assessment of development trends, draw up the right strategy and predict the situation for people who are involved in management. Thanks to internal analysis, co-founders can assess the correctness of the company management apparatus they have chosen and the extent to which they can be trusted with their own capital.
Analysis steps used
According to the basics of the analysis of financial statements, it is its phased implementation that allows you to gradually recreate the existing picture of work and draw the necessary conclusions for a full assessment of performance. There are five main stages, which can be supplemented and improved depending on what results need to be obtained later and how deeply to assess the economic situation:
- In the first stage, it is worth examining the state of circulating assets, as well as the rates of dynamic indicators for their growth and the amounts obtained as a result of circulating processes.
- At the second stage, it is necessary to study in detail the composition of the current asset and separately assess the liquidity of each of its parts.
- The third stage is to characterize the duration of cyclical operations in the production, operational and financial directions.
- At the fourth stage, it is worth determining how profitable each part of current assets is.
- In the fifth stage, it is worth considering where the main and secondary financing of this enterprise comes from, and also determine what its financial risks are.
An interesting video about the analysis of financial statements:
Another form of analysis
Conducting an express analysis of financial statements deserves special attention. Unlike other options, it allows you to quickly and efficiently recreate the overall picture of the enterprise. It consists of three stages.
The first stage, called the analysis of the property status, gives an idea of what property the given enterprise possesses in its sum, this also includes the composition of capital, as well as the amount of the material base and circulating assets.
The second stage includes the analysis of reports on financial results, determination of the profitability of various types of the company's activities and, accordingly, their profitability for it. The second stage of the analysis is carried out based on the calculation of profitability ratios.
The third step is to analyze the overall financial condition. Within its framework, both the general stability of the enterprise and its solvency are determined. They also assess the dynamics of the indicators of accounting items. It is the dynamic consideration that allows not only to give an overall assessment of development, but also to predict its direction, which is very important for ensuring the trend of growth in the profitability of the business.
So, the analysis of financial statements is the most important stage of its consideration. In the current conditions, it can be carried out manually, but it is much more convenient to use computer programs for this purpose, which provide a quick estimate in sum and text expressions after entering these accounting documents. Independent analysis allows you to maintain an individual approach and ensure a high-quality consideration of all indicators within the selected type of analysis.
Methodology for the analysis of accounting (financial) statements
Analysis of liquidity and solvency of the enterprise
The main condition for conducting a financial analysis is the ability to “read” the balance sheet. This is one of the ways to assess the financial capabilities of an enterprise and its resources for conducting business activities.
The balance sheet (BB) is the main form of analytical reporting that characterizes in monetary terms the financial position of an enterprise as of the reporting date and consists of two equal parts: an asset and a liability, which form 5 sections.
Balance analysis can be carried out using one of the following methods:
assessment directly from the balance sheet without preliminary changes in the composition of balance sheet items;
construction of a compacting comparative analytical balance by aggregating some elements of the same composition of balance sheet items;
additional adjustment of the balance sheet for the inflation index, followed by the aggregation of items in the required analytical sections.
Reading the balance sheet is a process of quantifying the main parameters of the financial functioning of an organization, which makes it possible to determine the following characteristics of the financial condition of the organization, as well as to identify the parameters of negative development:
the total value of the organization's property, equal to the sum of I and II sections of the balance sheet;
the cost of immobilized (i.e. non-current) funds (assets), equal to the total of the I-th section of the balance sheet;
the cost of mobile (circulating) funds, equal to the total of the II-nd section of the balance;
the amount of the organization's own capital, equal to the total of the 3rd section of the balance sheet;
the amount of borrowed capital, equal to the sum of the results of 4 and 5 sections of the balance sheet.
When analyzing the balance sheet, it is necessary to pay attention to the following indicators and their dynamics:
to change the balance sheet currency.
on the ratio of the growth rates of working and non-working capital.
In the structure of non-current and current assets, it is necessary to pay attention to the change in the following items:
Construction in progress. This item does not participate in the production turnover, and therefore, an increase in its share in certain conditions may adversely affect the results of financial and economic activities;
an increase in the share of long-term financial investments in non-current assets testifies, on the one hand, to the investment orientation of the organization's investments, and on the other, to the diversion of funds from the main production activity;
low share of liquid assets (10-12%) of the value of property, and the basis of current assets is production inventories. This ratio indicates, in particular, low liquidity of assets and insufficient liquidity of the balance sheet, which may lead to the insolvency of the enterprise;
the basis of current assets is production inventories. An increase in the share of inventories can indicate both an increase in production potential and an irrational economic strategy due to the immobilization of financial resources in insufficiently liquid assets. At the same time, this may be dictated by the desire to protect funds from the effects of inflation by investing in this item;
extremely low share of cash in current assets (4-7%) indicates the impossibility of immediate repayment of urgent obligations;
the growth of accounts receivable and especially doubtful to be returned indicates the immobilization of funds from circulation, negatively affects the solvency of the organization;
the growth rate of borrowed funds, outstripping the growth rate of current assets, leads to a decrease in the current liquidity of the enterprise. The excess of the growth of borrowed capital over its own indicates the dependence of the organization on external investors;
there is no retained earnings, reserve capital, accumulation fund in the structure of own funds. The lack of sources accumulated as a result of financial and economic activities reflects the low level of self-financing of the enterprise;
the main sources of property financing are own funds (90-97%), which are formed only by increasing the "Additional capital" account, which is increased (for a loan) due to the revaluation of fixed assets. This indicates the need to take into account the influence of the revaluation factor when analyzing the financial condition;
growth of the organization's short-term liabilities. If the liabilities exceed the amount of 100,000 rubles. and are not extinguished after three months, that is, the grounds for initiating a bankruptcy case of an organization in an arbitration court;
the rate of change in revenue, profit before tax and net profit is lower than the rate of change in non-current and current assets. This is evidence of a decrease in overall efficiency, an increase in production costs;
exceeding the growth rate of working capital, inventories, work in progress over the growth rate of revenue and profit indicate a decrease in the rate of working capital turnover, insufficient financial resources to cover costs and expand financial and economic activities.
Balance analysis begins with an assessment of the structure and dynamics of its sections on the basis of an analytical table containing aggregated, i.e. enlarged items - the results of the liabilities and assets sections. Analytical balance sheet allows you to assess the structure of the property of the enterprise and simultaneously perform horizontal and vertical analysis of the balance sheet
An enterprise's liquidity is the ability to convert its assets into cash to make all the necessary payments as they fall due.
The liquidity of the balance is understood as the degree of coverage of the company's debt obligations by its assets, the period of conversion of which into cash corresponds to the maturity of payment obligations. The qualitative difference between this concept and the liquidity of assets is that the liquidity of the balance sheet reflects the measure of the consistency of the volumes and liquidity of assets with the size and maturity of liabilities, while the liquidity of assets is determined regardless of the balance sheet liability.
When analyzing the liquidity of the balance sheet, a comparison is made between assets grouped by their degree of liquidity with liabilities for liabilities grouped by their maturity dates.
Assets are grouped according to the degree of decreasing liquidity with division into the following groups:
A1 - the most liquid assets. These include the funds of enterprises and short-term financial investments;
A2 - quickly realizable assets. These include accounts receivable with maturity in the reporting period, other assets, finished goods and goods shipped;
AZ is a slow-moving asset. These include current assets less finished goods and goods shipped, VAT on purchased values, accounts receivable (payments for which are expected more than 12 months after the reporting date). Inventories and work in progress are at the very beginning of the production cycle, so their transition to monetary form will require a much longer period;
A4 - hard-to-sell assets, which include fixed assets, intangible assets, long-term financial investments, construction in progress. These are the articles of the first section of the balance sheet "Non-current assets".
Liabilities are grouped according to the urgency of repayment of obligations:
P1 - the most urgent obligations. These include items "Accounts payable" and "Other short-term liabilities";
P2 - short-term liabilities. These include items "Short-term borrowed funds", "Deferred income", "Estimated liabilities", "Other liabilities";
P3 - long-term liabilities - long-term loans and borrowed funds;
P4 - permanent liabilities - equity capital, which is constantly at the disposal of the enterprise.
When determining the liquidity of the balance sheet of the group of assets and liabilities are compared with each other.
Conditions of absolute liquidity of the balance sheet:
A1> P1; A2> P2; A3> PZ; A4< П4.
There are 2 types of liquidity:
Current liquidity (TL) indicates the solvency (+) or insolvency (-) of the organization at the closest moment to the considered time.
TL = (A1 + A2)> (P1 + P2)
Prospective liquidity (LP) is a forecast of solvency based on a comparison of future receipts and payments. It will be ensured on the condition that the flow of funds, taking into account the available inventories and long-term receivables, exceeds all external liabilities.
PL = A3? P3, i.e. A1 + A2 + A3> P1 + P2 + P3
Absolute indicators allow for a preliminary analysis of liquidity, but do not give an idea of the scale of the lack of funds to repay liabilities. Therefore, it is necessary to supplement the analysis with the calculation and justification of relative indicators characterizing the degree of provision of the enterprise with circulating assets for conducting economic activities and timely repayment of urgent obligations.
One of the main criteria for the financial position of an enterprise is the assessment of its solvency, by which it is customary to understand the ability of the enterprise to pay off its liabilities, therefore, the solvent is the enterprise, which has more assets than external liabilities. Solvency means that the company has sufficient funds to settle accounts payable requiring immediate repayment.
The analysis of the company's solvency is carried out for:
regular forecasting of the financial position of the enterprise;
timely repayment of obligations to suppliers, the state, off-budget funds, employees, shareholders;
increasing the confidence of partners and investors in conducting joint activities.
Analysis of the financial condition of an enterprise includes an analysis of the balance sheet and reports on the financial results of the evaluated company (express analysis of financial statements) for the past periods to identify trends in its activities and determine the main financial indicators. Express analysis of accounting (financial) statements the enterprise involves the following stages:
Stage 1. Property analysis
Let us consider in more detail the stages of the express analysis of financial statements.
Stage 1. Analysis of the property status of the company
The most general idea of the qualitative changes that have taken place in the structure of the company's funds and their sources, as well as the dynamics of these changes, can be obtained using vertical and horizontal analysis of reporting. Vertical analysis reveals the structure of company funds and their sources, while horizontal analysis consists in constructing analytical tables in which absolute parameters are complemented by relative growth (decline) rates.
Stage 2. Analysis of financial results
The effectiveness and economic feasibility (and profit for us is the main and main) of the functioning of the enterprise is measured by absolute and relative indicators: profit, the level of gross income, profitability, etc. Using the data of the profit and loss statement (statement of financial results) of the balance sheet, we will calculate the main indicators profitability:
2.1. Return on sales. The formula for calculating the balance: K1 = (p. 050 / p. 010 f.2) * 100%, the return on sales ratio shows how much profit falls on a unit of products sold.
2.2. Profitability of core activities: K2 = line 050 / (line 020 + line 030 + line 040 f.2) * 100%, shows how much profit from sales falls on 1 ruble of costs.
2.3. Return on sales ratio (ROS): K3 = (p. 190 / p. 010 f.2) * 100%, sales revenue is the ratio of net profit to gross sales.
2.4. Return on assets of the company (ROA): К4 = ((net profit + interest) * (1 - tax rate)) / assets of the company × 100%, shows how many monetary units of net profit each unit of assets at the disposal of the company brings.
2.5. Return on equity ratio (ROE): K5 = (p. 190 f.2 / p. 490 f. 1) * 100%, shows how much income each ruble invested in the company's business by its owners brings.
2.6. The payback period of equity: K6 = p. 490 p. 1 / p. 190 p. 2, shows the number of years during which the investments in this organization will be fully paid off.
Stage 3. Financial analysis
As a rule, the analysis involves carrying out:
3.1. Assessment of the dynamics and structure of the balance sheet items.
3.2. Analysis of liquidity and solvency of the balance.
3.3. Analysis of financial stability and capital structure.
Assessment of the dynamics and structure of the balance sheet items. For a general assessment of the dynamics of the financial condition, it is necessary to group balance sheet items into some specific groups based on liquidity and urgency of liabilities. (Perform aggregation of balance sheet items). Based on the aggregated balance sheet, the structure of the property of the enterprise is analyzed.
Financial stability analysis. Assessment of the financial condition of an enterprise will be incomplete without an analysis of financial stability. The task of financial stability analysis is to assess the size and structure of assets and liabilities. Indicators that characterize independence for each element of assets and property as a whole make it possible to measure whether the analyzed organization is financially sound enough. The simplest and most approximate way to assess financial stability is to calculate the absolute indicators of financial stability.
Most often, for the analysis of financial stability, relative coefficients are used that are accepted in world and domestic accounting and analytical practice.
1.3. types of analysis of accounting (financial) statements
Financial analysis is carried out not only by the managers and relevant departments of the enterprise, but also by its founders, investors in order to assess the financial condition, study the efficiency of resource use, commercial banks to assess the creditworthiness and determine the degree of risk of issuing a loan, suppliers - for timely receipt of payments, etc. In accordance with the objectives, the analysis of accounting (financial) statements is divided into internal and external.
Internal analysis is carried out by the services of the enterprise, and its results are used to plan the financial condition of the enterprise, to ensure financial stability and solvency. Its goal is to establish a systematic flow of funds and place its own and borrowed funds in such a way as to ensure the efficient operation of the enterprise, maximize profits and exclude bankruptcy.
External analysis is carried out by investors, suppliers of material and financial resources, regulatory authorities on the basis of published reports. Its goal is to establish the possibility of profitable investment in order to maximize profits and minimize commercial and financial risks.
Analyzing the accounting (financial) statements, the user first of all determines the absolute indicators of the reporting forms and, during their analytical processing, goes to the relative indicators of the financial ratios.
The detailing of the financial analysis methodology depends on the goals set, as well as on various factors of informational, temporary, methodological, personnel and technical support. The logic of analytical work involves its organization in two stages:
preliminary assessment, or express analysis of the financial condition;
detailed analysis of the financial condition. Express analysis of accounting (financial) statements.
Its purpose is a clear and simple assessment of the property status and development efficiency of an economic entity. This type of analysis can be carried out by the auditor at the preliminary stage of planning the audit. It is advisable to perform express analysis in three stages:
preparatory;
preliminary review of financial statements;
economic reading and reporting analysis.
The purpose of the first stage is to decide on the advisability of analyzing the financial statements and to make sure that they are ready for reading. The first task is solved by preliminary acquaintance with the reporting and the latest audit report, the second is, to a certain extent, technical in nature. Here, a visual and simple counting check of reporting is carried out on formal grounds and in essence: the presence of all the necessary forms and applications, details and signatures is determined; the correctness and clarity of filling out the reporting forms is verified; the balance sheet currency and all subtotals are checked; the mutual linkage of the indicators of the reporting forms and the main control ratios between them are checked, etc.
The purpose of the second stage is to get acquainted with the explanatory note to the balance sheet, which is necessary in order to assess the working conditions in the reporting period, to identify trends in changes in the main performance indicators, as well as qualitative changes in the property and financial situation of an economic entity. You need to pay attention to the algorithms for calculating the main indicators. When analyzing trends in the main indicators, it is necessary to take into account the influence of some distorting factors, in particular inflation. In addition, it should be noted that the balance itself, being the main reporting and analytical form, is not free from some restrictions, the most significant of which are the following.
1. The balance sheet is historical by its nature: it fixes the results of financial and economic activity that had taken shape at the time of its compilation.
The balance sheet reflects the static in the funds and liabilities of the enterprise, that is, it answers the question of what the enterprise is at this particular moment according to the accounting policy used, but does not answer the question, which resulted in such a situation.
A number of analytical indicators can be calculated from the reporting data, but all of them will be useless if they are not compared with any base. The balance, considered in isolation, does not provide spatial and temporal comparability; therefore, its analysis should be carried out in dynamics and, if possible, supplemented by a review of similar indicators for related enterprises, their average industry and average progressive values.
Interpretation of balance sheet indicators is possible only with the involvement of data on the turnover of funds.
The balance sheet is a set of one-time data at the end of the reporting period and, therefore, does not reflect changes in the company's funds during the reporting period. This applies primarily to the most dynamic balance sheet items.
When compiling the balance sheet, the principle of valuation based on purchase prices was laid. In the context of inflation, rising prices for raw materials and equipment used at the enterprise, low renewability of fixed assets, many items reflect a set of accounting objects that are identical in functionality, but different in value, which, of course, significantly distorts the results of the enterprise, the real assessment of its economic assets, The “price” of the enterprise as a whole and its financial results, primarily related to the assessment of the use of capital.
One of the main goals of the functioning of any enterprise is to make a profit. However, this indicator is not fully reflected in the balance sheet. The absolute value of accumulated profit presented in it in isolation from costs and sales volume does not show, as a result of which this amount of profit was formed.
The balance sheet total does not reflect the amount of funds that the company actually has, its "cost estimate". The main reason for this is the possible inconsistency of the balance sheet estimate of economic assets with real conditions due to inflation, market conditions, etc.
9. The financial position of the enterprise and the prospects for its change are influenced by factors not only of a financial nature, but also of many others that do not have a value estimate at all (possible political and economic changes, a change in ownership, etc.), therefore, the analysis of financial statements is only one of the sections of complex economic analysis, using, in addition to formalized criteria, and informal assessments. The third stage is the main one in express analysis; its purpose is a generalized assessment of the results of the economic activity of the enterprise and its financial condition. This analysis is carried out with varying degrees of detail in the interests of different users.
Detailed analysis of accounting (financial) statements. Its purpose is a more detailed description of the property and financial situation of an economic entity, the results of its activities in the past year (period), as well as the development opportunities of the entity in the future. It concretizes, supplements and expands the individual analysis procedures described above (express analysis). It makes it possible to assess the financial position of the company, property status, the degree of entrepreneurial risk (the possibility of repayment of obligations to third parties), capital adequacy for current activities and short-term investments, the need for additional sources of financing, the ability to increase capital, rationality of using borrowed funds, efficiency companies. In general terms, the program for in-depth analysis of accounting (financial) statements may look like this:
1. Preliminary review of the economic and financial condition of a business entity.
Characteristics of the general direction of financial and economic activities.
Identification of "sick" reporting items.
2. Assessment and analysis of the economic potential of a business entity.
2.1. Property assessment.
Building an analytical net balance.
Vertical balance analysis.
Horizontal balance analysis.
Analysis of qualitative shifts in property status.
2.2. Assessment of the financial condition.
Assessment of liquidity.
Assessment of financial stability.
3. Assessment and analysis of the financial results of a business entity. Estimation of the volume of sales.
Analysis of the structure of the organization's income.
Analysis of the structure of the organization's expenses.
Profit analysis.
Profitability analysis.
Assessment of financial stability, credit and solvency.
Currently, there are several approaches to the sequence of the analysis:
from calculating and evaluating generalized indicators of the efficiency of capital use, studying its composition and structure to assessing the solvency and financial stability of an enterprise;
from the general characteristics and assessment of assets and their sources to the assessment of solvency, financial stability and efficiency of asset use;
from the analysis of financial results to a general assessment of the dynamics and structure of the balance sheet items, financial stability and liquidity, the efficiency of the enterprise;
from the analysis of capital formation, its placement, assessment of solvency, financial stability to the analysis of the efficiency of capital use and the main factors in the formation and change of the financial situation;
from analysis and liquidity, structure and cost of capital to the analysis of the turnover of working capital, profitability of the enterprise, prospective financial analysis and break-even assessment.
Control questions
Can you describe the regulatory framework for the preparation of accounting (financial) statements?
How is the property status of an enterprise estimated on the basis of the balance sheet data?
How to assess the demand for fixed assets according to the balance sheet?
Which lines of the balance sheet most often need detailing?
What explanations (references) does Form No. 5 “Appendix to the Balance Sheet” include for disclosing information on accounts receivable / payable?
What complex cost items are included in Form No. 2 "Profit and Loss Statement"?
What changes have been made to Form No. 2 in connection with the introduction of Chapter 25 of the Tax Code?
What areas of the organization's activities are highlighted in the form No. 4 “Statement of cash flows?
What information can be obtained from Form No. 3 “Statement of changes in equity”?
What are the objectives of the analysis of accounting (financial) statements?
What explanations are needed to understand the property status of the organization?
What clarifications are needed to understand the "quality" of an organization's financial performance?
What can cause an active cash flow from investment activities?
What explanations are required for Form No. 3 “Statement of changes in equity”?
What must be reflected in the explanatory note to the reporting forms?