Financial statement analysis is critical for any company to make its decision-making process easy and quick. It provides a complete analysis of the financial health of the organization. A healthy company is more likely to survive during a downturn. Financial health can be measured by a number of metrics, including profitability, liquidity, and asset quality. Analysis of financial statements is very important for any company. Financial statement analysis can be done manually and also with the help of automated financial statement analysis tools. It is impossible to analyze financial statements manually as it is a very time-consuming and complex task. Financial statement analysis tools are beneficial for saving time and effort.
What are the various types of financial statements?
- The income statement – is usually presented in the form of a quantitative statement that quantifies the profits or losses of the company compared to a previous period. It’s very similar to a company’s financial statements, but it focuses on the earnings (revenue less expenses) for your business rather than its assets.
- The balance sheet helps investors understand the company’s financial position and how it might perform in the future in respect of liability, assets, and equities. Assets are things of economic value owned by the company, such as cash, inventory, real estate, equipment, etc. Liabilities are things that the company owes to others, such as debt, accounts payable, vendor bills, lease payments, etc.
- The cash flow statement is a statement in financial analysis that shows the cash flow in and out of a business or investment over a given period. Cash flow statements fall into two parts – unadjusted and adjusted. The unadjusted statement shows how much cash comes in and goes out. The adjusted statement accounts for non-cash expenses like the depreciation of assets. The statement also includes cash flows from financing activities like the issuance or repurchase of stock.
- The statement of changes in stockholders’ equity shows the effects of cash flows on the equity of the company. For example, if the business issued stock during the reporting period, that would be listed here. If the business bought back stock during the reporting period, that would be listed here. If the business issued stock or bought back stock during the reporting period, the transaction would also be listed here. Any dividends paid during the reporting period would be listed here as well. Any other activities that have changed the company’s equity during the reporting period would be listed here as well.
How do the financial statement analysis tools work?
- Data extraction – The software collects financial data from the company’s accounting system and imports it into the software. Financial statement analysis software converts the data imported into a standardized format and extracts information.
- Data curation – Curating the data means organizing it to make it easier to read. Financial data is often quite complicated, so the best way to make it easier to read is to put it into a format that makes sense to the reader. A reader might be a financial analyst or a senior executive who wants to see what the company’s financial performance looks like. The financial statement analysis tools will help you pull the data from the financial statements and curate it for analysis. The software will show you key performance indicators of your company, such as operating profit and operating expenses, which are helpful for decision-making. You can also use the software to benchmark your company’s financial results against its competitors.
- Analysis of data – The company data is curated, and the financial statement analysis software analyzes the data to make comparisons between similar companies. The software can also make a financial statement analysis of how a company’s financial position has changed over time. It is very important to analyze the financial statements to find any anomalies or deviations from the expected trend and highlight them.
- Data reporting – In the reporting process, the financial reporting software will display the most important KPIs from the data analysis in a visually appealing way like graphs, tables, or dashboards.
What benefits do you get by using Financial Statements Analysis software?
- Accuracy – Since these are automated tools, you do not need to worry about any error that might creep in due to a manual calculation mistake.
- Speed – You do not have to spend hours or days on a report. These tools can give you instant accurate reports without spending long hours.
- Convenience – You do not need special skills or education to use these tools. Anyone can use them and get results.
- Financial statements analysis software offers many useful features that make financial analysis easier. These features include automated data extraction, built-in visualization, email and SMS notifications, collaboration capabilities, etc.
- You don’t need to be online to use this financial statement analysis software. Savings of the data can be done on csv or excel sheet.
- Financial statements analysis software is very cost-effective. The software cost is significantly less than the cost of hiring an accountant for a year.
Summary – There are several financial statement analysis tools providers in the market which are not genuine and will provide you with fake reports. You must choose a reputable software provider to get the correct reports and analysis. Perfios is one such vendor which is the leader in making such software with the best features. Perfios have a team of analysts who are well-versed with the software and are constantly updating the software with the latest information. Also, they have a team of certified and experienced analysts who will provide you with accurate reports. When investing your hard-earned money, you need to be extra careful as your money is not coming again. It will be best to be sure about the company you are investing in and the financial analysis software you are using. You can rely on Perfios. We are meeting all the customers’ expectations.
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