Introduction

Financial analysis is a method of assessing your business performance and results.

In this article, we’ll go over how to perform financial analysis using Google Sheets, Excel, and other tools. We’ll cover data collection and reporting, financial statement analysis, determining profitability, asset management and liquidity & activity analysis.

Data Collection

Collect data. The first step in performing financial analysis is to collect relevant information about your business or organization. You can do this by asking questions like: “What do we know about our customers?” and “How much money are we making from each product or service?”

Interpret the data you’ve collected. Once you’ve gathered all of the necessary information, it’s time to interpret it! This involves doing some math—you may have to crunch numbers, add columns together and divide them by other columns (or something similar). You might also need some help from an accountant if there are any tricky calculations involved.

Share your results with others who might benefit from them as well as anyone else who could use them for their own purposes such as investors, donors or board members/managers etcetera

Financial Statement Analysis

Financial statement analysis is the process of evaluating a company’s performance using its financial statements. The four categories of financial statements are the income statement, balance sheet and cash flow statement, which contain information about revenue sources—like sales or interest income—and expenses—like rent money paid to landlords.

The purpose of each statement is different:

Income Statement – Shows how much money was earned in a given period (e.g., last quarter). It also shows how much profit was made during that time period. If there was no profit made or if there wasn’t enough profit to cover all expenses then it would be negative number indicating loss instead of positive number showing profit.* Balance Sheet – Shows assets owned by the company at a certain point in time along with liabilities owed by them at that same point in time.* Cash Flow Statement – Shows changes in both assets and liabilities over time (e..g., what happened during this fiscal year compared with last fiscal year?).

Determining profitability

Profitability is the ability of a business to generate earnings. It’s an important measure of a company’s performance, because it can help you determine if your business is making enough money to be successful and allow you to focus on improving it.

The amount of profit that a company makes is called its net income, which is calculated by subtracting expenses from sales or other cash flows. You should also consider whether your business will benefit from investing in new equipment or technology that would increase productivity over time; these costs must be taken into account when calculating profitability.

Determining asset management

Assets are the things you own, including cash, property and equipment. They can be measured at cost value or market value. If an asset is valued at its original cost price (original cost), it will be included in the current assets account. If an asset’s value has increased because of a business opportunity that cannot be realized within one year (or 12 months), it should be moved into long-term assets instead of being included with current assets. This allows for better management because this type of investment does not affect cash flow immediately but rather increases future earnings potential over time.

Current assets consist mainly of cash on hand plus short term investments such as bank accounts; receivables from customers; inventory held for sale; prepaid expenses like payroll or rent owed by customers/clients etc.; prepaid insurance premiums payable upon receipt

Determining financial leverage

The financial leverage ratio is a measure of how much debt you have, relative to your assets. Specifically, it’s the ratio of total liabilities (like mortgages) to total assets (including equity). This can be used as an indicator of how vulnerable a company is to bankruptcy if its business goes belly up or hits hard times.

For example: If your company has $1 million in cash flow and $2 million in debt at current interest rates, then its financial leverage would be 2X; meaning that for every dollar it takes out in loans or borrowings, it has two dollars less available for investing and reinvesting into operations.

Determining liquidity and activity

The first step in performing financial analysis is determining liquidity and activity. Liquidity is the ability of a business to pay its liabilities (e.g., debts, loans), while activity refers to the company’s ability to generate revenue. This can be done by looking at cash flows, monthly sales figures and other relevant data points that describe whether or not there is enough money coming in each month so that bills can be paid on time without having excess cash sitting around waiting for something else to happen with it before being spent.

This concept helps ensure that you don’t make bad decisions based off of assumptions about things like “this person’s always going out drinking after work” or “they always spend $50 every time they go shopping.” Instead, you’ll know exactly how much money needs flowing through your system at any given time before making any decisions about what kind of products will sell better than others–or even create new ones altogether!

Financial analysis is a method of assessing your business performance and results

Financial analysis is a method of assessing your business performance and results. It is a process that helps you to understand the financial performance of your business, which can include its strengths and weaknesses.

Financial analysis helps to identify the strengths and weaknesses of your business so that you can take steps in order to improve it.

Conclusion

In this post, we discussed financial analysis. We looked at the different types of analysis that can be done and how to perform them.