What is a Financial Analysis Report?
Comprehensive financial analysis reports accentuate the strengths and weaknesses of a company. Communicating the company’s strengths and weaknesses in an accurate and honest manner is helpful in convincing the investors to invest in your business. A financial analysis report is, basically, a document that attracts high interest of investors as it contains a detailed appraisal of a company’s financial health.
How to write a Financial Analysis Report
1. Start the report with an “Executive Summary” of important findings from the financial analysis. Also state the time period focused by the study in addition to identifying the firm requesting the report.
2. Set up an introduction emphasizing the objectives of the report. Also define financial terms necessary for understanding those objectives.
3. Move on to a section with “Resources” title. Give a general description of the analyzed data and where has it been sourced from. Some examples of resource include balance sheets, income statements, operating costs, inventory ratios, and warehouse statistics.
4. Further describe the resources under the heading “Method of Collecting Data”. Mention whether the data was received from different sources, like government agencies or departments within the firm. Also explain each source’s method for reporting data. Explain about the method of accounting analysis for these distinct reporting methods.
5. Title the next section as “Significant Financial Events” and under this section, enlist the events which occurred during the studied time period and which altered results.
6. Proceed with a section titled “Detailed Results” which includes a comprehensive analysis about the investment returns, balance sheets, income statement, and productivity ratios. Also comment on each of these factors in addition to providing support for your statements with graphs and tables.
7. Evaluate results from various quarters in a section titled “Analysis of Variance”.
8. Prepare an appendix for “Financial Revenues” defining how that term was used for preparing the report. Tabulate the revenues over the analysis’ time period.
9. End the report with an appendix for “Observations” discussing any problems faced while performing analysis and thereafter explaining about how research method handled problems. Conclude the report with a statement projecting future performance on the basis of past years’ performance.
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Even in your professional work, particularly those who become equities researchers and investment analysts, you will be required to write and present financial analysis papers to management or investors. It is therefore imperative to learn and understand the format and analytical techniques to utilize in the paper.
Learn Key Tips On How To Write Financial Analysis Paper
Writing a detailed financial analysis of a company is very crucial since it is one of the tools used in determining whether to invest in the business. Note that there is no particular technique of writing a financial analysis, and the presentation styles will always differ. However, it is good to ensure that you include the key components in any financial analysis you prepare. Bear in mind that the financial health of a company can only be determined once all the components have been carefully reviewed.
A financial analysis paper provides information about the financial health of a company. Even though the history of a company can be summarized by a financial statement and stock performance, the financial analysis paper tries to incorporate all these information and more into a comprehensive and coherent system. Lenders, investors and financial analyst also use a detailed financial analysis, to find out if a company has the capability to deliver a good return on investment.
Note that this is the section of the paper that includes the most significant research from a financial analysis in a brief, easy-to-read format. The summary condenses the information presented in the whole report; comprising the insinuations those data bring to the industry and the company at large. In most cases, this section includes a concise summary of the firm’s mission, anticipated outlook, current performance, and history. On top of that, the section comprises an overview of the company’s industry, competition and market conditions.
The collection of financial declarations of a company is a core part of a financial analysis paper. The financial statement includes the balance sheet, equity statement, income statement and cash flow statement. The work of the balance sheet is to show the firm’s liabilities, allocation of properties and the equity of each shareholder. The income statements will outline the income, expenses, and profit or loss of a company. On the other hand, the investment statement will show all the changes in shareholder’s equity. The cash flow statements will explain where the business obtained its cash and how it is spending the cash.
It is evident that no company exist in a vacuum, and for that reason, a financial analysis paper should comprise an examination of the firm’s industry. The report must include comparisons between the company’s health and that of its competitors, and it will show the company’s market share and prominence in the industry. These features assist investors to find out if the business is competitive in its industry and if it would make a productive investment.
A financial ratio is meant to disclose such aspects like the liquidity of the firm, debt amount and efficiency of the company. The current liquidity ratio can be defined as the proportion of a company’s current assets to its current liabilities. On the other hand, the debt ratio is the ratio of the firm’s total debt to its total equity. Note that the return on equity ratio is the one that weighs the income of a company against the equity of its shareholders. The price to earnings ratio can be derived by dividing the existing market price by the after-tax profits per share.