Analysis of income and expenses of the organization characterizes the financial condition of the company at the end of the reporting period. It reflects data on income, expenses and other financial results. The analysis of expenses and income of the enterprise provides external users with information about the sources of profit or the reasons for the loss and reveals the general picture of the results of the company.
Analysis of the organization’s income and expenses is used not only to evaluate the results of its activities for the reporting period, but also to make a forecast of its future activities. The forecast of future results is very significant for investors, since it means the possibility of profit in the future, for lenders a positive forecast, first of all, means the possibility of paying the amount of debt with interest. If the activity of the enterprise is expected to be unprofitable, then the situation is assessed as the inability to pay the debt with interest, and it is unlikely that some bank will agree to give a loan to this organization. When compiling an analysis of the organization’s income and expenses, it is necessary to comply with a number of requirements that are used to more accurately forecast the enterprise’s activities. The requirement to provide information on discontinued activities, on transactions with affiliates, on the preparation of segmental reporting, on the reflection of events and conditional facts. These and other facts allow you to make an accurate forecast of the enterprise for the future. Analysis of the organization’s income allows you to determine the profitability of the enterprise and plan its income.
Having received reliable information about the facility’s activities for the previous period, you can learn to develop the right management decisions, programs and business plans for the future. In a market economy, it is very important to calculate the financial stability of the enterprise, that is, to ensure a state of financial resources in which it will be possible to freely manipulate cash and ensure the uninterrupted production process and unhindered sales of products as a result of their use. The boundaries of financial stability of the organization are considered the most important factor in a market economy. Insufficient financial stability leads to insolvency, to a shortage of funds, and subsequently to bankruptcy. Excessive financial stability slows down development, reducing profits and increasing the terms of capital turnover.
An analysis of the organization’s income and expenses makes it possible to justify the parameters of such stability, but it does not make it possible to judge the financial condition of the enterprise at the moment. Analysis of income and expenses is always necessary, regardless of economic relations. An urgent need for such an analysis arises when there is a transformation and reorganization of enterprises or legal entities. It is associated with the processing of a wide variety of information about the activities of the enterprise, which is most often used in financial reporting documents . Moreover, these data themselves do not affect the judgment on the state of affairs at the enterprise, but their accurate analysis needs processing.
Its main goal is to obtain the basic informative parameters that give an accurate and objective picture of the income and expenses of the enterprise for a certain period. Analysis of the movement of finance allows you to give a comprehensive assessment of all business activities and track the main trends in its development. Analysis of the organization’s income and expenses is an important part of the strategic plan, according to which the company can exist comfortably for a long time.