What is Financial Statement Analysis and How Does It Benefit You?

Posted by DeepOffice Inc. on February 3rd, 2020

For the Philippines based SMEs, financial statement analysis plays a critical role to get a clear idea of how their financial condition is. It helps in deciding whether funds are moving in increasing trajectory or if they are in red flag category or if the existing capital will help business stay afloat in the market in the coming fiscal year. With the right analysis in your hand, you can easily decide how your business is performing as compared with the past year and whether it will flourish in the upcoming year. All of this can be decided with the deep insights of seasoned accounting consultants in the Philippines. 

Evaluating the movement of your finances is the most crucial task. So, in this blog, we will discuss - what is financial analysis and why is it important for your business? 

What Does Financial Analysis Mean?

Examining how your finances are moving in order to determine the performance of your business and functioning capacity of your business for the next year is generally referred to as financial analysis. The analysis of your financial statements also helps you stay afloat in the market and attract potential investors. When you have a comprehensive knowledge of your reports and know your financial background better, prospects can show confidence to put their finger in and plan on how they can benefit from capitalizing on your venture. 

Since this analysis impacts how you will be running your business in the future, seeking the assistance of an experienced accounting consultant must be in your priority list. 

Why is Financial Analysis Important for Your Business?

Here are two of the most important benefits of financial analysis:

Your Progress Can be Tracked

When your financial statements are analyzed, it can reveal your upsides as well as downsides. When the finances of a certain period are tracked, they can be used to compare the performance of business. An expert’s eye can easily decipher the key factors that caused any minor changes in the numbers. Such important information can help project any pitfalls that might arise in the future so that you can prepare a backup plan within time. With the readily available information, you can adjust your funds, remove unnecessary items, and cut down some expenses to smoothen things in case any disruption occurs. 

Outsmarts Your Competitors

Analyzing the income statement provides better visibility of what your financial health is. Income statement analysis reveals a company’s revenue as well as the loss over a particular period. With the help of this document, one can calculate the financial ratios so that you can compare your business to others. This gives you the proper time for strategizing your plans for long-term. With the backup of the right accounting consultant, you can dominate the competition by preparing a roadmap beforehand so that you can navigate your business and its operations in the right direction. 

So, hire a reliable and experienced accounting consultant in the Philippines if you want to stay on the edge of the competition.