Summarized presentation
of a financial analysis

A. PRESENTATION OF THE BUSINESS

Elements	Describe	Comment situation	Possible evolutions
Origin, history	x
Activity and position (markets, production,     equipments, premises)	x	x	x
Markets (needs, segments, competition,    selling prices	x	x	x
Operational factors    (availability of supplies, production cycle)	x	x	x
Selling network and methods	x	x
Management, human resources	x	x

B. FINANCIAL DATA

Profitability: costs,  margins (for the last 3 or 5 years)

Sales / revenues, expenses / costs, margins (table below) + comments on the level and evolution of costs / profitability

Elements of P&L account (Income statement)	Year A		Year B
	Amounts	% of sales	Amounts	% of sales
Sales
Main costs (items or groups of items above 5 % of sales)
Operating profit / loss
Net profit (or loss)

Break-even	Is it high / low ? What sales are needed to reach it? Is this sales objective easy to reach?
Financial structure elements     (Balance sheet) for the last 3 or 5 years	Main assets / liabilities (take as model the profitability  table above) + add comments on solvency / liquidity
Risk (and opportunity) factors on revenues / costs / solvency	Main risk / opportunity factors. Is the sensitivity of earnings low / high? Balance sheet fragilities / strengths?

C. TARGETED QUESTIONS

The presentation document will not be a mess of observations,
only the main remarks will appear.

But, behind the curtain, a good analyst is above all a good detective, quite nosy,
always asking questions:

* Why does this specific item found in the balance sheet or in the P&L account    (income statement) changes faster / slower than that other one? * Your sales fall, stagnate or rise less than those of your competitors. Is it related     to the quantities sold? or to the selling prices? * OK, your sales grow. But does your market share grow or do you lose    ground compared to your competitors? * Fine, profits rise by 18%! OK, but sales rise by 26%. Look, behind the scene,    margins are shrinking! Costs are rising by 32%. Are there productivity    problems, are unit costs rising or not decreasing enough? Or are you pumping    up sales by lowering selling prices to fight fierce competition? * Your equipment and premises have a small / large valuation in your balance     sheet.     Are  they state of the art and productive? Or obsolete, insufficient (or on the     contrary too sophisticated,big and costly) unsuited or dilapidated? * Why is your inventory so large ? What does it include? What is its real value     compared to its accounting value? * I see that your customer accounts are larger and larger, but the reserves for    non payment stay low. How many customers pay late, for what amount, with    what delay? * I see your ST debts are rising. Are you late in paying your suppliers, employers,     taxes, social levies? * Look, I have problems to understand those "off balance sheet" lines, and also     those "footnotes".Do those hide something I should not see? * Etc., Etc, on any other thing that puzzles you. Here, experience (*),    imagination, curiosity, but also, strangely, routine and discipline come into    play (need of written analysis procedures with a check-list of things to look at).

(*) To analyze, unless superficially, accounts of stores, farmers, restaurants, builders, low
       tech / high tech manufacturers, insurance brokers, real estate developers, etc.,
       supposes a good knowledge of the peculiarities of those sectors of activity,
       to gather benchmarks and have a long practice of analyzing their accounts.

You can find a larger list of analysis principles and ratios at:

=> http://www.quickmba.com/

D. WRAP UP

The last section is a  wrap up that gives synthetic elements to help the decision making
process. This final section has to:

1) Be based on the company's economic     aptitudes	This supposes to have done a "SWOT" analysis: Strength, Weaknesses, Opportunities, Threats.
2) Be based on scenarios of the business     future evolution	This supposes to have done a prospective analysis
3) Include specificities related to the     decision objectives	Stock valuation, credit decision, complex project: see the precisions below:.

D1. Wrap up on equity analysis / stock or business valuation?

 Start from LT (5 years for example)
     earnings per share prevision scenarios: 

• If possible, do it by building simplified prospective P&L accounts
  (use the table above that shows the past profitability).

• For this purpose, analyze revenues / costs / earnings sensitivity and do
  a prospective analysis of the main evolution factors.

• Use, at the end, the evaluation models [valuation sheet] and the
  classification of stock images [image categories].

D.2 Wrap up on credit decision?

 Start from the repayment capability.

The ratio (annual debt repayments / cash earnings) is an indicator.

But better have a multi-annual funding plan (resources vs. use of
resources). 

We need also, as the docs say, complementary analyses:

• Types and valuation of collaterals,

• Legal situation / precautions / conditions,

• Criteria for follow up and alert.

D.3 Wrap up on complex project
      (business creation, acquisition, merger)?

For this type of financial study related to the implantation of an economic ,

project we can take elements from D1+D2 seen above,

It is also useful to have a little look at the marketing plan section,
and specifically business plan.

END (for the time being ?) of the financial analysis section

click scam