The main aim of financial analysis is to get some priority (the most representative) indexes which give the picture of financial state of the enterprise.

Here are some of these indexes:

–        changes in the structure of assets and liabilities;

–        dynamics of account receivable;

–        the size of profit and loss, the level of return on assets, of the own capital and sales;

–        changes in turnover of assets and of the own capital;

–        the presence of flowing capital in the beginning and in the end of research period and so on.

Herewith the head managers can be interested both in the present financial state and in the financial projections for the company in the near future. Naturally financial analysis can’t be compared with due diligence but it also can be useful for estimation of business strategy of the company and for estimation of initial business plan and marketing plan.

The initial base for financial analysis is data of bookkeeping and book accounting studying of which helps to renew all key aspects of industrial and financial activity and all accomplished operations in generalized form in other words in necessary for analyst degree of aggregation.

There are several basic methods of financial analysis:

–        reading of book accounting;

–        horizontal analysis;

–        vertical analysis;

–        trend analysis;

–        comparative (spatial) analysis;

–        factorial analysis;

–        method of financial coefficients.

Reading of the book assets is the general acquaintance with financial state according to the data of statement balance, its schedules and review of profits and losses. This is the necessary stage of financial analysis in which analyst get acquainted with the object of research.

Horizontal (time) analysis consists of the comparison of indexes of book accounting with parameters of the previous periods.

Vertical (structural) analysis is carried out in order to define the specific gravity of some balancing items in the total final index and then to compare the received result with data of the previous period.

Trend analysis is based on the calculation of the relative deviations of the accounting parameters for several periods (quarters, years) from the level of the basic period. Trend helps to form project analysis.

Comparative (spatial) analysis is carried out on the basis of internal economic comparison of single indexes of the enterprise and of the same indexes of the companies-competitors.

Factorial analysis is the process of studying the influence of single factors (reasons) on the regulative index with the help of determinate and statistical methods of research.

Method of financial coefficients is the calculation of ratio of data of book accounting and determination  of correlations of indexes.

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