The Importance Of Financial Reporting And Analysis: Your Essential Guide

Financial reporting is an important part of your business at various levels -from a legal point of view, for your investors, and for internal monitoring

Table of Contents

1) What Is Financial Reporting?

2) The Benefits Of Financial Reporting

3) Why Is Financial Reporting Important?

4) 5 Use-Cases For Financial Reporting

5) Who Uses Financial Reporting And Analysis?

6) Different Ways Of Financial Reporting 

7) Common Types Of Financial Reporting

8) Key Elements Of Financial Reporting Systems

While you may already know that a detailed financial reporting process is important (mainly because it’s a legal requirement in most countries), you may not understand its untapped power and potential. In fact, finances analysis is one of the bedrocks of modern businesses. It offers a level of insight that helps businesses remain compliant while streamlining their income or expenditure-centric initiatives across the board.

Utilizing financial data with the help of online data analysis allows you to not only share vital information both internally and externally but also leverage metrics or insights to make significant improvements to the very area that allows your business to flow.

To help you unlock the potential of financial analysis and reporting, we’ve produced this guide to tell you everything you need to know about the topic. Let’s hit it off with a detailed definition. 

What Is Financial Reporting?

Financial reporting and analysis is the process of collecting and tracking data on a company’s finances, including its revenues, expenses, profits, capital, and cash flow. Businesses use them to inform their strategic decisions and stay compliant with tax regulations.

Each of these financial KPIs is incredibly important because they demonstrate the overall ‘health’ of a company – at least when it comes to the small matter of money. These types of KPI reports don’t offer much insight into a company’s culture or management structure, but they are vital to success, nonetheless.

As we continue, we’ll explore the use cases of financial analysis and reporting, but for now, it’s worth noting that these reports are crucial for anyone looking to make informed decisions about their business. Financial reporting software and BI reporting tools offer invaluable information on elements including investments, credit extensions, cash flow, and so on. Financial reporting and analysis are also legally required for tax purposes.

That said, there are various types of financial reporting that can serve different purposes. Some of the most common ones include: 

Whatever your company’s financial aims, with the right analytical approach, you can significantly accelerate the growth of your business. In this post, we will see the power of financial analysis and reporting in detail, look at real-world finance reporting examples, and discuss why this approach should be a vital component of every modern business strategy.

Now that we’ve explored what we consider to be a good corporate financial reporting meaning, let’s glance at the benefits of these kinds of reports.

The Benefits Of Financial Reporting

To continue our journey, let’s consider the key benefits of financially-based reporting and analytics.

Why Is Financial Reporting Important?

Top 10 reasons stating the importance of financial reporting and analysis

A report from McKinsey suggests that leveraging data to create more proficient marketing reports and to make more informed decisions can boost marketing productivity by 15 to 20%, which translates to as much as $200 billion based on the average annual global marketing spend of $1 trillion per year .

If you apply that same logic to the finance sector or department, it’s clear that financial reporting tools could serve to benefit your business by giving you a more informed snapshot of your activities.

Financial reports offer a wealth of insight that can streamline your business’s fiscal activities. But, before we look at the benefits in more detail, let’s get down to brass tacks – what’s the point and the role of financial data analysis and reporting?

Well, there are three main factors:

To further illustrate the importance of this process, let’s break these 10 primary reasons for financial reporting down into more detail.

1) For taxes

You may have heard the phrase: the only two certainties in this world are death and taxes (or something similar).

That said, taxes are arguably the biggest reason for the importance of financial statement analysis – basically, you have to do it! The government utilizes such reports to ensure that you’re paying your fair share of taxes. If financial reports weren’t legally required, most companies would probably use management dashboards instead (at least for internal decision-making purposes).

The government’s requirements for these documents have created an entire industry of auditing firms (like the “Big 4” of KPMG, Ernst & Young, Deloitte, and PWC) that exist to independently review companies’ financial reports. This auditing process is also a legal requirement.

2) For other companies, investors, shareholders, etc.

If you’re considering investing money in a company, it only makes sense that you’ll want to know how well that company is doing – according to a standardized litmus test; not measurements that a company has fabricated to make themselves look good.

This is where the importance of financial statements comes into play for investors. This also applies to credit vendors and banks who are considering lending money to a company. In these situations, you will need to gain an accurate understanding of how likely you are to be paid back so that you can charge interest accordingly. 

For this purpose, it’s great to have an investor relations dashboard at hand. With metrics such as the return on assets, return on equity, debt-equity ratio, and more, the investor’s dashboard displayed below offers a detailed overview of the company’s financial performance tracked over a period of time. The value of this tool lies in its interactivity if you want to take a deeper look at some of these indicators you just need to click on it and the entire report will be filtered based on the selected data. 

Financial reporting example for Investors

**click to enlarge**

The importance of financial analysis and statements also applies to stakeholders. If you own equity in a firm or are an activist investor who owns a major equity position, then having full disclosure of all assets, liabilities, use of cash, revenues, and associated company costs is essential. You will also want to understand if the company is doing something it shouldn’t (such as in the case of Enron).

Due to a series of laws known as Sarbanes-Oxley , there is more standardization/legal cooperation within the world of financial data analysis and reporting. These laws are designed to prevent another situation like, and we’ll say it again – Enron – from happening.

3) For internal decision-making

As mentioned, financial reports are not the best tools for making all internal business decisions. However, they can serve as the ‘bedrock’ for other reports (such as management reports ) that CAN and SHOULD be used to make decisions.

It’s crucial that financial reports are as accurate as possible – otherwise, any management reports (and ensuing decisions) based on them will be sitting on a shaky foundation. This is where companies can run into trouble, using legacy methods (such as one massive spreadsheet that multiple users have access to) rather than reaping the benefits of reporting by utilizing financial dashboards instead.

In fact, a survey conducted by Deloitte to generate awareness about the value of good financial analytics and reports, states that the majority of respondents have identified an “insufficient level of details” as the main issue when it comes to finances reporting. This is due to the fact that the techniques and templates being used are too old. Modern online dashboards put these problems in the past by providing at-a-glance information on the financial health of your company, for both yourself and others in a way that is intuitive and detailed.

Remember: the government (and outside investors) don’t care WHY your financial reports are inaccurate. They’ll just penalize you for being wrong – it’s that cut and dry.

4) For improved internal vision

Financial analysis and reporting are accurate, cohesive, and widely accessible means of sharing critical financial information throughout your organization. If your financial insights or data are fragmented, things can quickly fall apart.

Financial analysis and reporting help to answer a host of vital questions on all aspects of your company’s financial activities, giving both internal and external stakeholders an accurate, comprehensive snapshot of the strategic as well as operational metrics they need to make decisions and take informed action.

5) For building strategies and ensuring profitability

Following the previous point, financial analysis and reporting are critical to building informed strategies and ensuring the business stays profitable. In fact, going back to the Deloitte survey that we mentioned earlier, 67% of the respondents believe that the data included in their financial statements is key to “identifying effective ways to reduce costs and to eliminate potential losses in order to maintain profitability.” 

That said, these types of reports become critical to the financial health of a business. It allows managers and any other stakeholders to build informed strategies that will make the company more profitable while empowering every key player to rely on data for their decision-making process. With the help of modern online reporting software , companies can find trends and patterns in real time as well as monitor their income and expenses to allocate resources smartly. 

6) For raising capital and performing audits

Our next answer to the question ‘why is financial reporting important?’ is two-fold: for raising funds more accurately and managing your funds more compliantly.

Financial reporting and analysis assist organizations, regardless of industry, in raising capital both domestically and overseas in a well-managed, fluent way – an essential component to ongoing commercial success in today's competitive digital world.

Also, financial analysis and reporting facilitate statutory audits. Statutory auditors are required to audit the financial statements of an organization to express their opinion. Reporting tools or software will give this official concise, accurate, and compliant information – which, of course, is vital.

7) For managing financial ratios

Ratios are essential to a business’s fiscal management initiatives - and there are many to consider. In this context, ratios are a representation of the fine juggling act businesses must perform to ensure the entire operation runs with maximum efficiency.

Financial ratios also help investors break down the colossal sets of financial data accrued by businesses. A ratio gives your data form and direction, facilitating valuable comparisons on different reporting periods.

Displayed visually, modern financial graphs and dashboards provide a wealth of invaluable performance-based information at a single glance, offering essential tools for accurate benchmarking and real-time decision-making.

Critical financial reporting ratios include the Working Capital Ratio, Quick Ratio, Return on  Equity (ROE), and Berry Ratio. Armed with this wealth of insight, it’s possible to preserve your company’s financial health while developing initiatives that tip the fiscal balance in your favor, boosting your bottom line in the process. The image below is a visual example of financial reporting tracking the quick ratio. 

Visual representation of the financial KPI quick ratio to put the value of financial ratios into perspective

Generated with a professional financial KPI tool , the quick ratio is a metric that tracks the short-term liquidity or near-cash assets that can be turned quickly into cash. The point of this KPI, which is also known as the acid test ratio, is to include only the assets that can be easily converted into cash, usually within 90 days or so, such as accounts receivable.

8) For accurate projections & predictive strategies

When considering the importance of financial statements to stakeholders, it’s worth mentioning the predictive power of financial analysis.

We’ve explored how financial dashboards offer dynamic data visualizations from trend spotting and real-time decision-making. Digging a little deeper, fiscal reporting tools also provide comprehensive insights into a range of financial performance and processes. Historic, real-time and predictive data combined offer a balanced snapshot of metrics that help users make incredibly accurate projections based on past or emerging trends.

By making projections based on concrete visual data, it’s possible to develop strategies that benefit financial health while nipping any potential issues in the bud.

Personal financial management provider, for example, used predictive analytics to grow its user base and increase its bottom line. Analyzing a mix of consumer data and key financial performance metrics, the company was able to streamline its processes while offering its customers an end goal, and working backward.

By providing a predictive goal or aspiration, the business worked in reverse (both internally and externally), developing accurate solutions or strategies that offered the best return on investment (ROI) along the way. Not only did this predictive strategy serve to streamline Mint’s internal processes, but the company grew from zero to 1 million subscribers in a relatively short period of time.

Speaking on the company’s financial triumph, senior executive, Noah Kagan, explained:

“Think of it as a road trip. You start with a set destination in mind and then plan your route there. You don’t get in your car and start driving without the hope that you magically end up where you wanted to be.”

9) For lowering risk and preventing fraudulent activities

Expanding on our previous point, the depth of data and predictive capabilities that the financial BI dashboard software offer can mitigate financial risk, significantly.

Working with the right mix of metrics, you will begin to see any potential dips in performance or negative patterns unfold intuitively, which means you can take critical actions that prevent potentially devastating monetary calamities.

Armed with dynamic, visual, and interactive KPIs, not only can you mitigate financial risk and protect your company from glaring inefficiencies, but you will be able to make smarter investments and decisions. Here are some of the KPIs that you should focus on for financial protection, and growth:

In addition to reducing financial risk across the board, a data analytics dashboard can also protect your business from fraudulent activity. And, considering 46% of companies across sectors have fallen victim to financial fraud in the past two years, protecting yourself from internal or external cyber-related crime matters now more than ever.

Through frequent benchmarking and analysis, you will increase your chances of identifying any abnormalities and investigating the matter immediately. This quick response approach will empower you to get to the root of the problem, tackling the issue while reducing further financial damage.

10) To ensure transparency across the board

As we mentioned time and again throughout this post, reporting on finances is key to the internal functioning of a business. But not just that, financial statements also prove to be very useful to ensure transparency. For instance, a business working in the public sector might be financed by taxpayers or donors, therefore, they need to be accountable for the way they spend the money they have received. For this purpose, financial reports play a fundamental role since they not only ensure that public entities are transparent and compliant but also that people maintain a relationship of trust with these entities.

Another example is with big enterprises, customers are becoming more and more critical of the way companies make business decisions today. By making their financial data public and transparent, big enterprises can build stronger relationships with their customers. For example, by showing their charitable actions or sustainability spending. On the other hand, if you offer long-term services, providing information about your company's financial performance can be a reassurance for potential clients that you can stay in business with them for long periods of time. 

In summary, financial analysis and reporting can help businesses of all sizes to build trusted relationships with investors, shareholders, employees, and even customers. Being able to clearly communicate that the company is doing well financially can bring several benefits.

5 Essential Use-Cases For Financial Reporting

Up until now, we’ve looked at things from a big picture point of view. Now, let’s get a little more tangible and a trifle more down-to-earth by exploring some valuable questions that financial reports (and the reports based on them) can help you answer.

1. Is purchasing this stock a good idea?

If you’re really doing your due diligence on a company that you’re considering investing in as an individual or on behalf of your current organization, financial data analysis and reporting can give you some (relatively) “hard” data that will help you make your decision.

This is also one way you can gain insight into whether a company is potentially under- or overpriced in the stock market.

2. Are we profitable? Will we be in the future?

Without embracing the importance of financial statements, it’s difficult to tell how much money your company is making after paying all of your expenses and payroll. Since one of the main reasons a company exists is to make profits for itself and its shareholders, this is crucial information – no compromises.

3. How much cash ‘runway’ do we currently possess?

If you’ve ever been a part of the management team of a startup, you might have some idea of how stressful it can be not to know if you’re going to be able to ‘make payroll’ in the coming months.

That’s where the importance of financial statements comes in.

Cash is oxygen to a business, and financial reporting analysis can help you see how many months’ payroll your business can give out while remaining financially solvent (assuming that revenue numbers stay the same).

This is a good ‘worst-case scenario’ exercise to conduct regularly – and it’s even more sturdy if you assume that your revenues will fall over the next few months compared to your best guess projections.

4. Do we have the capital to invest in new lines of business?

Some companies, like Apple , like to sit on colossal amounts of cash. Their strategy is to have this money built up so that they can remain financially solvent even if some pretty catastrophic things happen to the economy.

However, other companies prefer to invest their money if they can do so while remaining financially healthy. For example, computer chipset manufacturers like Intel upgrade their factories and equipment on a regular basis.

These upgrades are extremely expensive, and while they are a good long-term investment, the company in question must make sure they have the short-term cash flow to support these kinds of moves.

5. Are my vendor relationships as healthy as they should be?

When considering ‘why is financial analysis important?’ it’s always worth considering your vendors. Whether you’re a service- or product-based business, your vendor or supplier relationships are tightly linked to your company’s ongoing financial health.

If your supplier or vendor relationships are strained, inefficient, or fraught with issues, you will stunt organizational productivity, damage your brand reputation, and ultimately, lose money (frequently).

Typically, your vendors or suppliers will have individual payment processes and credit rules. Streamlined financial analytics ensures payments and transactions remain fluent at all times, especially if used with a modern client dashboard .

Plus, by working with metrics such as Vendor Payment Error Rate, it's possible to keep track of vendor payments while identifying any under or overpayments during a set timeframe. Accessing this level of insight will optimize your vendor or supplier processes, saving time and money in the process.

Who Uses Financial Reporting And Analysis?

We’ve already stated the importance of financial analysis and reporting throughout the post and how they serve as communication tools to keep internal and external stakeholders informed and connected. Financial reports are versatile analytical tools that businesses of all sizes use to review their data, stay compliant, and ensure profitability and healthy financial performance. That said, there are various groups that can benefit from financial analysis and reporting for different purposes, some of them include: 

3 Different Ways Of Financial Reporting And Analysis

“In a perfect world, investors, board members, and executives would have full confidence in companies’ financial statements… Unfortunately, that’s not what happens in the real world, for several reasons.” – Where Financial Reporting Still Falls Short, The Harvard Business Review article

We won’t get too deep into the ‘financial reporting rabbit hole’ at this point, but we can say with certainty that there are many, many pitfalls associated with this kind of reporting. Some of them are technical pitfalls, while others are ethical ( Enron , anyone?).

Right now, it’s enough to understand that there are three main ways that financial reports are standardized, and one critical element to consider when working with EU-based data of any kind:

These differences in standardization have real-world consequences. As the HBR article states:

“Cadbury’s GAAP-based return on equity was 9% — a full five percentage points lower than it was under IFRS (14%). Such differences are large enough to change an acquisition decision.”

6 Common Types Of Financial Reporting

Financial data is not easy to understand, and getting everything together in an infinite Excel sheet makes it even harder to extract valuable information from it. With this issue in mind, is that interactive financial reporting software has been developed to assist businesses in the visualization and analysis of their most important financial data. With technologies such as predictive analytics, automated reporting , and intuitive dashboards, businesses can extract insights in real-time to make important financial decisions. 

We’ve already discussed some of the common types of financial reports theoretically at the beginning of the post. Now, we will cover some visual examples of these types of reports to put their value into perspective. These 5 examples were generated with a professional financial dashboard generator . 

1) Income Statement

This particular financial reporting template tells you how much money a company made (or lost) in a given time period (typically a fiscal year). It does so by showing you revenues earned and expenses paid, with the ultimate goal of showing a company’s profit numbers.

What makes this template so valuable is the fact that it offers a complete overview of the month-to-month performance of the business. For instance, the operating costs (OPEX) are broken down by month and by department, this way decision-makers can spot any inefficiencies and pinpoint the causes and origin to optimize them promptly. Likewise, the earnings before interest and taxes (EBIT) is broken down with a target line to easily evaluate if the business’s finances are developing according to plan.

Visual of a financial business report example for top-management

Primary KPIs:

2) Balance Sheet

Moving on with our list of financial reporting examples, we have a balance sheet that offers a snapshot of your assets and liabilities (aka debts) at a given moment in time. It’s definitely possible to fall into bother with your profitability and cash flow situations while having a healthy balance sheet (especially if you have a lot of money tied up in physical inventory), and this report will help you dig deeper, assisting your strategic decision-making.

A balance sheet is a good overview of the assets and debts of your company at a specific moment

3) Cash Flow Statement

This report shows how much money flowed into and out of your business during a period of time. The cash flow statement is crucial for things like making sure you have enough money to make payroll.

This highly interactive and visually appealing template provides the necessary data to get an overview of the liquidity and current cash flow situation of your company. In this case, we can see that the quick ratio is showing a red exclamation mark, which could mean that your company is not able to pay the current liabilities with the most liquid assets. To get deeper insights into this situation, the dashboard also offers detailed breakdowns of days sales outstanding and days payable outstanding for the last 12 months, making it possible to find improvement opportunities to drive growth and success.

Your Cash Flow Statement is very important to know if you have enough money for payroll; it shows you how much money went in and out of your business

Our next two financial analysis report examples are full dashboards that host a mix of visual metrics and KPIs, offering a complete picture of a company’s fiscal activities in action. Let’s take a look.

4) Financial KPI Dashboard

Offering an essential snapshot of vital financial performance data, a robust financial KPI dashboard offers a cohesive mix of tables, graphs, and charts designed to maintain fiscal health. Working with KPIs such as Working Capital, Cash Conversion Cycle, Budget Variance, and more, this dynamic financial reporting system will empower you to reduce inefficiencies, make accurate forecasts, and keep cash flowing through the organization effectively.

A financial dashboard showing relevant metrics such as the current working capital, cash conversion cycle, and vendor payment rate

5) CFO Dashboard

Also known as the ‘CFO cockpit’, this powerful CFO dashboard provides a digestible glance at high-level fiscal metrics and essential economic trends. With detailed insights into the likes of employee satisfaction and the Berry Ratio, here you will find everything you need as a senior decision-maker to identify emerging trends, make informed organizational decisions, and meet (or even exceed) your profit targets consistently.

Financial reporting and analysis example: CFO dashboard

6) Accurate vs Forecast Dashboard

At a first glance, this financial reporting dashboard offers all the same indicators as an income statement, however, this information is complemented with valuable forecasts for costs and income. Considering the fast-paced nature of the current business landscape, being able to get an accurate picture of what will happen in the future becomes an invaluable competitive advantage. 

The dashboard offers insights into 3 key areas: revenue, costs, and net profit. Each of them is depicted with the actual and forecasted value for the last 12 months, as well as the absolute variance in dollars and a percentage. How accurate the absolute difference is, will depend on the goals of the organization and how close they are to the forecast, however, they still represent an accurate picture to make important decisions about budgeting and other processes.

In the lower part of the example, the metrics are broken down by month and compared to the forecast. This is valuable input as it allows us to dig deeper into the data. For instance, the cost breakdown shows all departments stayed within the expected spending, except for marketing. In that scenario, it would be smart to analyze if those extra costs are justified or not. 

what is analysis report

Primary KPIs:  

What Should a Successful Financial Reporting System Include?

So far, we have gone through benefits, examples, use cases, and much more valuable information regarding financial reporting requirements and processes. To finalize this insightful guide on the topic, we will go through some key elements a successful financial reporting system should include. 

In the past, the tools and techniques used to generate these reports were static, making the process way different than it is today. Whereas in the past the report generation process required a lot of time and manual work, today, reports are generated with live data that enables businesses to make important decisions in real-time. That being said, below we will present a few elements that are key to success in today’s modern business landscape.  

Real-time data: As mentioned, one of the key elements that make financial reporting quality is the presence of real-time data. Being able to track every last detail of your financial performance as soon as it occurs enables you to make strategic decisions that will drive success and significantly mitigate risks. For instance, you can allocate resources smartly based on live trends or control expenses that are not going as planned and might bring negative consequences in the future, among many other things. 

Predictive analytics: Another element that has become fundamental for businesses wanting to extract the maximum potential out of their financial data is predictive analytics. This technology uses a mix of current and historical data to extract patterns and trends from financial information and generate accurate forecasts about future performance. This helps businesses in predicting and optimizing several processes such as anticipating future product demand or identifying potential loss drivers, among others.  

Automation: Traditional means of financial reporting required endless hours of manual work not only on the generation of the actual report but also on data collection, classification, and analysis. This made the process way less efficient as by the time a report was finished the data in it might not be valuable anymore. That’s why financial reporting automation has become a key requirement. Being able to automatically generate reports with live data leaves decision-makers enough time to focus on other important tasks while significantly mitigating the risk of human error from manually generating a report. 

Accessibility and collaboration : In order for a company’s financial goals to be achieved it is necessary to involve all departments and relevant stakeholders in the process. This is possible thanks to the level of accessibility and collaboration provided by modern financial analytics software such as datapine. Reports are generated using interactive data visualizations that make the data in them easier to understand for non-technical users, plus, they can be easily shared in multiple formats to support meetings and discussions. 

So, What Is The Purpose Of Financial Reporting? 

To reiterate: What is the importance of financial reporting? Thoughts or feelings aside, financial reporting will be around as long as businesses are trading.

Why? Governments will never stop collecting taxes and commanding compliance. Across sectors, businesses will always need to track their fiscal activities with pinpoint accuracy - and finance reporting is the best way to do so.

In addition to paying taxes and remaining compliant in the eyes of the law, financial reporting tools give businesses the capabilities to make their fiscal activities all the more strategic, streamlined, and forward-thinking. In that sense, financial reporting tools are both functional and progressive, empowering users to accelerate the growth of their businesses by taking charge of their financial health.

While you may not be able to choose if or how you prepare financial reports, you can at least take control of how you present them. With a financial, real-time dashboard , you can see your company’s financial integrity at a glance, empowering you to make better choices while responding to constant change.

To get started with finance-based reporting, try our financial analytics software with a free 14-day trial . It’s time to take your business to the next level.

Home Business Guides What Is Financial Analysis & Reports?

What Is Financial Analysis & Reports?

What Is Financial Analysis and Reports

Tally Solutions  | Updated on: July 20, 2022

What is financial analysis, how is a financial analysis done, types of financial analysis, investment financial analysis, corporate financial analysis, examples of financial analysis, why is financial analysis useful.

The financial status of a company can be studied through financial analysis. The financial analysis process helps determine if the company is financially stable, solvent, profitable, and an attractive investment. Financial analysis can also be applied to budgets, projects, businesses, or other finance-related entities. A company can analyze itself to make decisions based on its present and past performance. The two types of financial analysis are fundamental analysis and technical analysis. Fundamental analysis is helpful to find the intrinsic value of securities, while technical analysis studies its trends in value. Investors must always perform financial analysis before making investments.

Financial analysis is the study of a company, business, project, or other financial entity to determine its financial status, performance, and potential. Companies use financial analysis to decide on their policies and plans, and determine if a project is likely to do well financially. Before investing money into a company, investors and potential buyers study a company's investment potential.

The company’s financial statements , such as the balance sheet , income statement, and cash flow statement, hold the information required for the company's financial analysis. The analyst can also calculate ratios from the financial data and compare them with those of other companies or with the company's past performance.

Financial analysts use statements such as income statements , balance sheets, and cash flow statements , as the basis for their study. The current financial period will be sufficient if the company is being analyzed for its current status. If the analyst wants to study the company’s historical trends, past financial statements would also be required. Financial analysis can also use past trends to predict a future trend.

There are two general types of financial analysis; fundamental and technical analysis.

Fundamental analysis : Fundamental analysis aims to determine the value of the business. It uses data such as the earnings per share (EPS) and other ratios. These ratios must be analyzed based on the company’s economic and financial situation. The financial analyst calculates the actual intrinsic value of the security and compares it with the current price to determine if it is undervalued or overvalued. This is an essential process for an investor to prevent investing in an overvalued company. An undervalued one has more opportunities for a good return on investment.

Technical analysis : Technical analysis of a company ignores its financial statements and studies its performance in the markets. The market activity, such as moving averages, reveals how much the security prices fluctuate and the market sentiments driving the changes. It is an external analysis as opposed to an internal analysis. It uses market trends and publicly available information to assess the company's finances.

The types of financial analysis can also be classified based on which aspect of the financial information is being studied, as follows:

Vertical analysis : Vertical analysis aims to determine how the company has utilized its resources and how these resources are allocated. The reports that are studied are the balance sheet and the income statement. The information such as assets, liabilities, and shareholder’s equity are converted into percentages. These percentages are then compared with other companies in the same industry or of the same size. This helps assess the company against similar ones.

Horizontal analysis : This method of financial analysis compares the previous years' financial statements to find the company's growth rate. The comparison can go back three to five years and may also include forecasts based on the historical data. This shows the company’s performance trends. It is useful to compare this with the industry standard for a more meaningful interpretation.

Liquidity analysis : Liquidity is the availability of the means to meet a company’s short-term goals and commitments. The ratios that are commonly studied for this purpose are:

Turnover analysis : The turnover information of the company is studied by determining the following:

Profitability analysis : It is important to study how profitable a company is by analyzing the following numbers from the income statement:

Risk and leverage analysis : The debt that the company is carrying, repayment capability, and the level of risk involved are studied through the following financial analysis metrics:

Stability analysis : The stability ratio is used to calculate the stability of a company in the long run.

Fixed asset ratio = Fixed assets / Capital employed

Coverage analysis : The interest due to lenders and the dividends to be paid to the shareholders are studied.

Control analysis : This is the analysis used by the company’s management to check their performance. Control analysis uses three ratios:

Valuation analysis : The following help a financial analyst determine the fair value of a company:

The two types of valuation analysis are:

Cost analysis

Relative value market analysis

Scenario and sensitivity analysis : This analyzes the degree of sensitivity to risk. Both valuation and financial modeling techniques are used to envision the best case and worst-case scenarios for the company and then predict its sensitivity to it. It is useful to plan budgets and forecast the sensitivity of the company’s value in different scenarios.

Variance analysis : In internal planning, a forecast or budget is compared to the actual results. The variance is analyzed to see how the company has performed against its planned performance. Variability can be due to controllable or uncontrollable reasons.

Rates of return : The goal of every business is to make a profit based on the investments. The company's rate of return is of interest to the management, investors, lenders, and other stakeholders. Some of the metrics that are analyzed are:

One of the main reasons for a company's financial analysis is investment purposes. An investor would want to know how attractive an investment the company is. Mergers and acquisitions only happen after due diligence, which includes financial analysis. Financial analysts generally study a group of companies in a particular category to determine the most suitable ones to invest in. They may follow a top-down or bottom-up approach. A top-down approach identifies the sectors and verticals that offer the most growth opportunities. The financial analysts then study companies within this category to find the best ones to invest in.

A bottom-up approach starts with specific companies and their performance. They are more focused on the microeconomic factors that affect its performance, such as its financial statements, product or service offerings, supply and demand, financial health, and other similar factors. They are more interested in the individual company’s performance and prospects.

Companies conduct internal financial analysis to assess performance and make better decisions. This internal analysis is called corporate financial analysis. The net present value (NPV) and internal rate of return (IRR) ratios are also studied to determine if proposed projects should be executed. When credit is extended to customers, cash receipts may be delayed. In such companies, it is essential to track the day sales outstanding (DSO) to assess how long it takes for cash collection from a sale and determines the health of the cash collection cycle. This analysis is helpful to spot recurrent periods of peak demand and be prepared to take advantage of them. For example, suppose there is a festival season that always generates more demand and sales. In that case, the company can adjust its production and inventory levels to fulfill the demand and generate maximum sales. Similarly, the company should also be prepared for periods of a lull in the business.

We can take the example of a larger company analyzing a smaller one for acquisition. They may study the data and see that the earnings per share for each quarter in the current year is consistently higher than the earnings in the corresponding quarter in the previous year. So, since the intrinsic value of the shares is rising, the company looks like an attractive one to acquire.

They can also look at the trend in the share prices for the last five years and see if the increase has been consistent. The performance average can help the company generate estimates of how the share value will grow.

Financial analysis is useful for the company to make long-term plans. Investors use financial analysis to identify companies for investment, and it helps them decide when and how much to invest. When there are multiple attractive investment options, financial analysis helps pick the better investment options. A financial analysis quantifies and simplifies the information available in a company’s financial statements, and it helps in the easy and quick interpretation of its financial status and prospects.

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What Is a Sales Analysis Report?

Marketing Research Reports & Industry Analysis

What are the limitations of portfolio analysis, business management swot analysis.

A sales analysis report shows the trends that occur in a company's sales volume over time. In its most basic form, a sales analysis report shows whether sales are increasing or declining. At any time during the fiscal year, sales managers may analyze the trends in the report to determine the best course of action.

A sales analysis report shows the company;s sales broken down by geography, product or customer group. It can help managers make better data-driven decisions going forward.

Shows Actual and Projected Sales

A sales analysis report shows a company's actual sales for a specified period – a quarter, a year, or any time frame that managers feel is significant. In larger corporations, sales analysis reports may only contain data for a subsidiary, division or region. A small-business manager may be more interested in breaking sales down by location or product. Some small, specialized businesses with a single location are compact enough to use general sales data.

Managers often use sales analysis reports to identify market opportunities and areas where they could increase volume. For instance, a customer may show a history of increased sales during certain periods. This data can be used to ask for additional business during these peak periods. A sales analysis report may also compare actual sales to projected sales.

Assess New vs. Repeat Sales

A sales analysis can include the percentage of revenue coming from existing business versus new business, and can break down sales by different customer groups. This type of breakdown might be useful for managers who want to know if they're retaining business. A new versus repeat analysis is also useful in measuring the effectiveness of new advertising, new products and the deliberate targeting of new customer segments.

Assess Product Demand

One of the trends that a sales analysis report can reveal is whether there's a problem with product demand. A long-term decline in sales for a single product may indicate several problems. The competition could be eroding market share, or other products sold by the same company may be doing the same. A long-term decline may mean that it's time to stop selling the product or revamp the brand.

In some cases, a decline can reveal that customers' needs are changing. Managers could rebrand or repackage the product for a new purpose or a new target market.

Estimate Market Prices

In some industries, such as residential real estate, a sales analysis report is used to estimate market prices. Characteristics or features of a product may determine its market value, based on what the market has paid in the past. For example, specific features of a home may cause it to increase or decrease in value. Such features include the number of bedrooms, square footage, fireplaces and swimming pools. In other lines of business, this same principle can be applied to a product's raw materials, brand name or reputation.

Helen Akers specializes in business and technology topics. She has professional experience in business-to-business sales, technical support, and management. Akers holds a Master of Business Administration with a marketing concentration from Devry University's Keller Graduate School of Management and a Master of Fine Arts in creative writing from Antioch University Los Angeles.

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What Is Business Analysis and Reporting?

what is analysis report

Business analysis and reporting are two critical activities every business works on daily. Even though they’re separate activities, they’re deeply intertwined.

Business analysis activities are executed before reporting activities. The former speaks to understanding and mapping out business needs into business solutions by gathering necessary customer, user or general stakeholder requirements (current needs). That information is then translated into processes, tools and solutions that speak to those needs and provide a solution to the requestor.

Reporting activities revolve around collecting and summarizing business and process performance metrics in formats that are ready to be read, consumed, understood and acted upon by business owners and key decision makers that use reporting information to discuss and make business decisions. 

Together, these two activities indicate a wide variety of tasks and job responsibilities that, in large organizations, are managed by different roles. Business analysts focus on (you guessed it) business analysis while other data professionals may specialize in reporting. Data analysts and business intelligence managers may take on their fair share of the reporting responsibilities. In smaller organizations, a business analyst may cover business analysis and reporting activities. 

Related Reading on Built In Data Analyst vs. Data Scientist: Similarities and Differences Explained

Why Is Business Analysis and Reporting Important?

The purpose of business analysis is to bridge the gap between a sub-optimal business state (the present) and an improved state (the future) by translating high-level business needs into specific and actionable requirements that can be executed and built by the development or engineering team depending on the project.

The purpose of reporting is to keep key stakeholders in the loop and enable them to make informed decisions that improve business and process performance. The objective of reporting activities is not to provide a solution to business problems, but to bring information to light that allows stakeholders to discuss the problem and find solutions.

Both of these steps are of vital importance for a business. Proper analysis and informed decision making based on data and reporting puts an organization in a position to make decisions to positively impact the company’s bottom line and future growth. Without proper analysis and reporting practices, decision making is based on senior leaders’ gut feelings and not operational data.

More From Built In Experts 6 Types of Data Analysis

Examples of Business Analysis Activities

Below are some examples of business analysis activities, which are usually performed by business analysts or other similar roles:

Examples of Reporting Activities

Below are some examples of reporting activities which are usually performed by data analysts, business intelligence managers, insight managers or other similar roles:

what is analysis report

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Age Analysis Report

This report displays accounts with their aged balances .  This enables you to follow up on overdue accounts and also to determine the overall state of your debtor's book.  It is strongly recommended that this report be used on a regular basis to identify overdue accounts and to take appropriate action.

Click here  for general information on working with reports.

Main settings tab

Start at Account and End at Account These two Account Selectors  enable you to choose which accounts to include in the report.  The report is generated in account number order .  If you leave the Start at Account as First account and End at Account as Last account then all accounts will be included.

Order This combobox  determines whether accounts are listed in account number or alphabetical order.

As at period This determines how the ageing is calculated.  Normally you would select either the current period or the previous period (if you have just moved into a new period).

Medical aid accounts , Injury on Duty accounts and Private accounts These checkboxes  determine which accounts are included in the report based on their account type .

Split balances between person responsible and funder If this checkbox  is checked Panacea will display two lines per account, one line displaying the person responsible's balance and one displaying their funder's balance.  If it is not checked then only one line will be displayed per account with the overall balance.

Positive balances This checkbox  determines whether accounts with a positive balance are included in the report.  A positive balance means that money is owed to you.

Negative balances This checkbox  determines whether accounts with a negative balance are included in the report.  A negative balance means that you owe money (probably to the Person Responsible ), perhaps because the account was overpaid.

Zero balances This checkbox  determines whether accounts with a zero balance are included in the report.

Telephone numbers This checkbox  determines whether telephone numbers are included on the report.  These may be useful if you intend using the report to call people with overdue accounts.

Funder details This checkbox  determines whether each account's funder's  details are included.  For example, on medical aid accounts the medical aid name will be shown.

Notes This checkbox  determines whether the account notes  are included in the report.  When following up on overdue accounts it is a good idea to keep a record of conversations and arrangements that have been made.  The Notes tab  on each account allows you to do this.  It is also useful to include these notes on the Age Analysis Report so that you can familiarize yourself with the history of the account before calling the Person Responsible .

Age to This ComboBox  allows you to determine how many ageing periods should be calculated.  By default the ageing is calculated up to 120 days , but you can extend this to 180 days .  This may be useful when dealing with very overdue accounts.  Note that Panacea may change the orientation of the report to fit more columns if necessary.

Current, 30 days, 60 days, 90 days etc These checkboxes  determine which accounts are included in the report based on their ageing.  Each account's most overdue amount determines whether it is included.  For example this can be useful if you want to focus on very overdue accounts: you could check just 120 days .

Categories tab

This tab enables you to filter accounts by Account Category .  Check the Display category colours on report checkbox  if you have a colour printer and want the category background colours to be printed on the report.

Once you have configured the report click the Go button.  For a short period the Go button will disappear, then a Cancel button will appear.  You can stop generation of the report anytime by clicking Cancel .  The Age Analysis can take quite a while to generate but it runs in the background so you can carry on with other Panacea activities while it is busy.


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  1. Analysis

    Analysis ( PL: analyses) is the process of breaking a mathematics and logic since before Aristotle (384–322 B.C.), though analysis as a formal concept is a relatively recent development

  2. What is Financial Analysis and Reports

    The financial analysis process helps determine if the company is financially stable, solvent, profitable, and an attractive investment. Fundamental analysis is helpful to find the intrinsic value of securities

  3. What Is a Sales Analysis Report?

    A sales analysis report shows the trends that occur in a company's sales volume over time. In its most basic form, a sales analysis report shows whether sales are increasing or declining. At any time during the fiscal year

  4. What Is Business Analysis and Reporting? (Definition)

    Business analysis and reporting are two critical activities every business works on daily. Business analysis activities are executed before reporting activities

  5. What Is The Analysis In A Lab Report Writing

    What is the analysis in a lab report? This is a shortened paper that includes the assay of the data collected during the experiment (both text parts and equations). It is a constituent part of the lab report

  6. Age Analysis Report

    It is strongly recommended that this report be used on a regular basis to identify overdue accounts and to take appropriate action. It is also useful to include these notes on the Age Analysis Report so that you