A fiscal year is a period of time for which business entities (enterprises, budget organizations) compile reports on their activities, as well as the period for which the state budget is drawn up and operates.
This concept is used when conducting a financial analysis of a company. Within its framework, an
analysis of the balance sheet is carried out - its structure and dynamics, liquidity ratios, calculation of net assets, profitability and
asset turnover, profitability of activities based on the profit and loss statement. Financial analysis is the study of changes in key indicators of the development and condition of a company in order to determine its financial stability, solvency, creditworthiness, and prospects. Financial stability reflects the company's ability to optimally use its money to ensure an uninterrupted production and sale cycle of products (services), as well as to invest in expanding and developing the business, updating the material and technical base. As a rule, when analyzing the dynamics of the above indicators, the last fiscal year and the previous three are compared.
Who conducts, for whom (and why) do you need an analysis of the company? Two categories of users are distinguished by financial reporting and the results of such an analysis: internal and external. Employees or company management are engaged in internal financial analysis to monitor financial and organizational activities, as well as to identify further prospects and reserves for the development of the company. Sources of internal financial analysis are the expanded
balance sheet, various kinds of
financial reports (including profit and loss), statements for past periods, for the current financial year and at present. The main point of internal financial analysis is the
calculation of capital
efficiency , the relationship of costs, turnover and profits, borrowing and equity. In other words, it considers all aspects of the company. Often, the indicators and conclusions of such an analysis are a trade secret.
The objectives of the internal financial analysis can be: increase profits, search for reserves to reduce costs and increase revenues, develop a new market, reduce accounts receivable for the next financial year and subsequent periods. The results of internal analysis are used by the owners and top managers of the company.
External financial analysis is carried out by interested third parties and individuals on the basis of open and public financial statements. It can be creditors, shareholders, suppliers, buyers, business partners, investors. The results of external financial analysis are important for banks and leasing companies when considering the possibility of lending to a company (whether it can be calculated on credit and interest); for potential shareholders and investors in assessing the feasibility of investing in this company; to the state - for taxation; arbitration manager - to identify opportunities to get out of a state of bankruptcy or to prevent insolvency and bankruptcy of an enterprise.
In different countries, the reporting year is set differently, often coincides with the calendar year, but there are also historical exceptions. For example, the fiscal year in the United States is set from October 1 to September 30, in the Russian Federation - from January 1 to December 31.