financial lists analysis

Financial statement analysis (in English: Financial Statement Analysis) is an assessment of the particular financial condition of various establishments. Through the role of the accountant responsible for implementing a set of duties that include analyzing profits and losses, following up on administrative decisions, and contributing to the preparation of financial statements, financial statement analysis is defined as the process that contributes to implementing a review of all financial statements belonging to the establishments, such as the balance sheet, which contributes to Understanding the organization's financial situation and providing assistance in making effective decisions. Another definition of financial statement analysis is to audit and examine the financial data of an entity. Which contributes to its evaluation and determination of its ability to implement its financial obligations.

Steps for analyzing financial statements

The success of applying financial statement analysis depends on key steps, the most important of which are:

Know the economic characteristics: It is the first step in analyzing the financial statements, and it constitutes a series of activities related to the production or industry, and the distribution of special products or services in the facility.
Determine the company's strategies: It is the second step in analyzing the financial statements. It is concerned with identifying the nature of the products or services provided by the facility, and also studies the level of special margins in profits, the nature of the brand, control of costs, and industrial and geographical diversification.
Evaluating the facility’s financial statements: It is a review of all private financial data in the facility, within the accounting standards associated with this field, and when studying the private financial accounts in the balance sheet, it is important to ensure that the evaluation, classification, and recognition are carried out as the main elements of the correct evaluation, and when studying the income statement it is important to evaluate profits. As it represents the entity’s own economic performance, the evaluation of the cash flow statement provides information about the nature of the entity’s own financial liquidity. By following up on its activities and investments within the financial period.
Profitability and risk analysis: It is the step that helps financial statement analysts evaluate the facility and its financial statements. When analyzing profitability, it is important to determine the extent of the profits of the facility’s operations relative to its assets, and the shareholders’ opinion on the nature of its profits, and the nature of the risk affecting the facility must also be evaluated.
Preparing expected financial statements: It is the final step in analyzing the financial statements, and includes a set of hypotheses that financial analysts must prepare. In order to anticipate the future of the facility and its scope of work, and then measure the nature of the impact of these assumptions on financing and cash flows.

Types of financial statement analysis

Financial statement analysis is divided into three main types:

Objectives of financial statement analysis

Analyzing financial statements contributes to achieving many goals in the work environment, including:

Identifying the specific financial situation in establishments.
Providing an overview of the nature of the operational and financial performance of the establishments.
Evaluating the possibility of paying obligations, whether short or long-term, and repaying the debts incurred by the establishments.
Contributing to the preparation of future plans to activate the role of internal control.
Identifying the weak points of facilities, and searching for proposed solutions that contribute to providing appropriate treatment for them.

Financial Statements

Financial statements (in English: Financial Statements) are one of the most important basic elements used to clarify the financial condition of companies, institutions and organizations. Financial statements are divided into the following types:

income list: It is a list that contains all profits, losses, expenses, and private revenues in the organization. Revenues represent all the money obtained as a result of a group of business operations. Expenses are the costs or money that is spent in exchange for the organization obtaining something. The nature of expenses is related to the ability to Revenue generation.
Balance Sheet List: It is a financial statement that contains each of the assets, liabilities, and private property rights in an institution. The value of the assets must be equal to the value of the liabilities to which property rights are added. Assets are divided into two types: fixed or current. As for liabilities, they are divided into two types: current or long. term, and the ownership rights in the institution constitute the total equity of shareholders in the capital.
Statement of Cash Flows: It is a list that explains the nature of money in the institution, and contains a group of items affecting the financial balance in it. Its first section includes all operational activities that explain all financial movements inside and outside the institution, and contains net income, and the changes that appear in most of the special accounts in the balance sheet list. It also contains investment activities that show the institution’s incoming money, and the financing activities item constitutes all incoming and outgoing cash flows related to securities.