Determining the financial stability of an enterprise is one of the most important components of a market economy. An insufficient financial base of an enterprise most often leads to the insolvency of the organization, and as a result to bankruptcy, while an excessive financial base impedes development and leads to the appearance of excessive reserves and reserves, thereby increasing the terms of capital turnover and reducing profits. Profit analysis, to some extent allows us to determine the parameters of such stability, it serves as the basis for making the right decisions regarding the further development of the company, but it does not give a clear picture of the situation of the enterprise at the moment.
Profit analysis is always necessary, regardless of the method of economic relations, however, some of its aspects directly depend on social conditions and economic conditions. In a market economy, many entrepreneurs often resort to financial analysis in order to monitor the state of the work of their company, as well as in critical situations when you need to accurately assess the financial situation of the company at the moment. Profit analysis is necessary when transforming organizational and legal structures, in the process of corporatization and privatization of an enterprise, as well as when raising bankrupt enterprises to a new level. In any reputable financial institution, each quarterly and annual report on the activities of the enterprise is necessarily accompanied by a profit analysis.
Often, the analysis of profit and economic activity is associated with the processing of a large amount of information affecting various aspects of economic activity. As a rule, these are financial statements, accounting records, a statement of the balance sheet of an enterprise. Thus, the accounting data serve as the basic basis for conducting financial analysis, although by themselves they are only an assumption of the true state of affairs at the enterprise. At enterprises, accounting serves not only to reflect the situation of income, financial transactions and business transactions. His data is a necessary aspect for making managerial decisions and planning future tasks.
Profit analysis sets itself the main goal - to obtain the main informative parameters that will give an accurate and objective picture of the profit and loss of the enterprise, its financial condition, changes in the assets and liabilities of the enterprise, as well as settlements with debtors, creditors, income of the bank servicing the transaction. Such information is obtained as a result of a comprehensive analysis of a wide variety of financial documents using a special scientifically sound methodology. The result is a clear picture of the state of the enterprise, its assets, liabilities, property, profitability of the funds used and the speed of working capital.
Profit analysis allows you to track the development trends of the enterprise, to give an objective assessment of its commercial and economic activities. It is also the link between production and business activities and management decisions. Financial analysis can be external and internal, and both are very important.
External analysis of profit gives a clear picture of the liquidity of the balance sheet, profit, profitability and solvency of the enterprise, as well as the overall level of income of the company. At the same time, internal financial analysis is carried out in the interests of the company itself, it is as necessary as external. With its help, control over all branches of the enterprise is carried out, and further ways of its improvement are outlined.