{"id":8592,"date":"2019-10-30T00:17:33","date_gmt":"2019-10-29T16:17:33","guid":{"rendered":"http:\/\/www.finereport.com\/en\/?p=8592"},"modified":"2025-09-04T17:32:19","modified_gmt":"2025-09-04T09:32:19","slug":"3-steps-to-an-effective-financial-statement-analysis","status":"publish","type":"post","link":"https:\/\/www.finereport.com\/en\/data-analysis\/3-steps-to-an-effective-financial-statement-analysis.html","title":{"rendered":"Effective Financial Analysis in 3 Steps"},"content":{"rendered":"\n<p>In general,&nbsp;<a rel=\"noreferrer noopener\" href=\"https:\/\/www.finereport.com\/en\/financial-dashboards\" target=\"_blank\">Financial statement reports&nbsp;<\/a>can show the enterprise\u2019s financial situation, operating results, and cash flow. However, this is just a vague concept when the original data is unable to speak, because you cannot know the conclusion directly from the financial data itself. To let the data speak and reflect the enterprise\u2019s financial situation and potential issues, you need to do an effective&nbsp;financial analysis&nbsp;and display financial statement reports in an appropriate form.<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><a href=\"http:\/\/www.finereport.com\/en\/wp-content\/uploads\/2019\/10\/2019102904I-1.jpg\"><img loading=\"lazy\" width=\"750\" height=\"505\" src=\"https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2019\/10\/20210331C-Financial-Statements-Analysis.png\" alt=\"\" class=\"wp-image-11775\" srcset=\"https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2019\/10\/20210331C-Financial-Statements-Analysis.png 750w, https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2019\/10\/20210331C-Financial-Statements-Analysis-300x202.png 300w\" sizes=\"(max-width: 750px) 100vw, 750px\" \/><\/a><figcaption>A Complete Guide for Financial Analysis<\/figcaption><\/figure><\/div>\n\n\n\n<div id=\"toc_container\" class=\"toc_transparent no_bullets\"><p class=\"toc_title\">Contents<\/p><ul class=\"toc_list\"><li><a href=\"#What_are_the_Financial_Analysis_Statements\">What are the Financial Analysis Statements?<\/a><\/li><li><a href=\"#The_Types_of_Financial_Analysis_Statements_and_Templates\">The Types of Financial Analysis Statements and Templates<\/a><ul><li><a href=\"#Balance_Sheet\">Balance Sheet<\/a><\/li><li><a href=\"#Income_Statements\">Income Statements<\/a><\/li><li><a href=\"#Cash_Flow_Sheet\">Cash Flow Sheet<\/a><\/li><li><a href=\"#Statements_of_Shareholders_Equity\">Statements of Shareholders Equity<\/a><\/li><\/ul><\/li><li><a href=\"#The_Purpose_of_Financial_Analysis\">The Purpose of Financial Analysis<\/a><\/li><li><a href=\"#Financial_Statement_vs_Financial_Reports\">Financial Statement vs Financial Reports<\/a><\/li><li><a href=\"#3_Basic_Steps_to_an_Effective_Financial_Analysis\">3 Basic Steps to an Effective Financial Analysis<\/a><ul><li><a href=\"#1_Be_Clear_about_the_Most_Critical_in_Your_Financial_Analysis\">1. Be Clear about the Most Critical in Your Financial Analysis<\/a><\/li><li><a href=\"#2_Select_Data_Analysis_Methods_for_Financial_Analysis\">2. Select Data Analysis Methods for Financial Analysis<\/a><\/li><li><a href=\"#3_Select_the_Right_Financial_Analysis_Tool\">3. Select the Right Financial Analysis Tool<\/a><\/li><\/ul><\/li><li><a href=\"#Key_Takeaways_of_Financial_Analysis\">Key Takeaways of Financial Analysis<\/a><\/li><\/ul><\/div>\n<h2><span id=\"What_are_the_Financial_Analysis_Statements\">What are the Financial Analysis Statements?<\/span><\/h2>\n\n\n\n<p>Financial statements are <a href=\"https:\/\/www.finereport.com\/en\/reporting-tools\/accounting-reports.html\" target=\"_blank\" rel=\"noreferrer noopener\">accounting statements<\/a> that reflect the capital and profit status of an enterprise or budget unit in a certain period of time. It is prepared by a company to present the financial performance and position in a readable and standardized way.<\/p>\n\n\n\n<p>According to Wikipedia<a href=\"https:\/\/en.wikipedia.org\/wiki\/Financial_statement\" target=\"_blank\" rel=\"noopener noreferrer nofollow\">[1]<\/a>, financial statement typically include four basic financial statements accompanied by a management discussion and analysis: They are (1) balance sheets; (2) income statements; (3) cash flow statements; and (4) statements of shareholders equity.&nbsp;<\/p>\n\n\n\n<h2><span id=\"The_Types_of_Financial_Analysis_Statements_and_Templates\">The Types of Financial Analysis Statements and Templates<\/span><\/h2>\n\n\n\n<p>Financial statements usually include four types: income statement, balance sheet, cash flow statement, and sometimes shareholder equity statement. (All templates on this page are made using <a rel=\"noreferrer noopener\" href=\"https:\/\/www.finereport.com\/en\/\" target=\"_blank\">FineReport<\/a>)<\/p>\n\n\n\n<h3><span id=\"Balance_Sheet\">Balance Sheet<\/span><\/h3>\n\n\n\n<p>The balance sheet mainly tells us the company&#8217;s assets and liabilities under the current circumstances. The most important check relationship is that debt plus equity equals assets. In terms of accounting, what I currently own is called assets, the borrowed funds are debts, and my own funds are called equity.<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img loading=\"lazy\" width=\"1024\" height=\"744\" src=\"https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2021\/01\/acc03-min-1024x744.png\" alt=\"Balance sheet is one of most important part in financial statement analysis\" class=\"wp-image-11469\" srcset=\"https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2021\/01\/acc03-min-1024x744.png 1024w, https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2021\/01\/acc03-min-300x218.png 300w, https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2021\/01\/acc03-min-768x558.png 768w, https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2021\/01\/acc03-min-1536x1116.png 1536w, https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2021\/01\/acc03-min-2048x1488.png 2048w, https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2021\/01\/acc03-min-360x261.png 360w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><figcaption>Balance sheet by FineReport<\/figcaption><\/figure><\/div>\n\n\n\n<div class=\"wp-block-buttons\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link has-vivid-cyan-blue-to-vivid-purple-gradient-background has-text-color has-background\" href=\"https:\/\/www.fanruan.com\/en\/demo\" style=\"border-radius:50px;color:#fffffa\" target=\"_blank\" rel=\"noreferrer noopener\"> Download the Template<\/a><\/div>\n<\/div>\n\n\n\n<p><\/p>\n\n\n\n<h3><span id=\"Income_Statements\">Income Statements<\/span><\/h3>\n\n\n\n<p>The income statement or income statement mainly tells us the company&#8217;s profit and loss over a period of time. A typical income statement contains three parts: total income, total expenses and net income. Among them, the most important check relationship is that revenue minus costs. The idea is to outline all the things that affect your profit.<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img loading=\"lazy\" width=\"683\" height=\"1024\" src=\"https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2021\/01\/accounting-reports-income-statement-finereport-683x1024.png\" alt=\"Income statement is one of most important part in financial statement analysis\" class=\"wp-image-11464\" srcset=\"https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2021\/01\/accounting-reports-income-statement-finereport-683x1024.png 683w, https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2021\/01\/accounting-reports-income-statement-finereport-200x300.png 200w, https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2021\/01\/accounting-reports-income-statement-finereport-768x1152.png 768w, https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2021\/01\/accounting-reports-income-statement-finereport-1024x1536.png 1024w, https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2021\/01\/accounting-reports-income-statement-finereport.png 1283w\" sizes=\"(max-width: 683px) 100vw, 683px\" \/><figcaption>Income statement by FineReport<\/figcaption><\/figure><\/div>\n\n\n\n<h3><span id=\"Cash_Flow_Sheet\">Cash Flow Sheet<\/span><\/h3>\n\n\n\n<p>The cash flow statement mainly tells us how much cash the company has received over a period of time, how much cash has been paid, and how much cash is left in the bank. The most important check relationship in the cash flow statement is that the cash inflow minus the cash outflow equals the remaining cash. This relationship is also very simple, so I will not explain too much here.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" width=\"799\" height=\"1024\" src=\"https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2021\/01\/acc02-min-799x1024.png\" alt=\"Cash flow statement is one of most important part in financial statement analysis\" class=\"wp-image-11468\" srcset=\"https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2021\/01\/acc02-min-799x1024.png 799w, https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2021\/01\/acc02-min-234x300.png 234w, https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2021\/01\/acc02-min-768x984.png 768w, https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2021\/01\/acc02-min-1199x1536.png 1199w, https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2021\/01\/acc02-min.png 1486w\" sizes=\"(max-width: 799px) 100vw, 799px\" \/><figcaption>Cash flow statement by FineReport<\/figcaption><\/figure>\n\n\n\n<div class=\"wp-block-buttons\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link has-vivid-cyan-blue-to-vivid-purple-gradient-background has-text-color has-background\" href=\"https:\/\/www.fanruan.com\/en\/demo\" style=\"border-radius:50px;color:#fffffa\" target=\"_blank\" rel=\"noreferrer noopener\"> Download the Template<\/a><\/div>\n<\/div>\n\n\n\n<p><\/p>\n\n\n\n<h3><span id=\"Statements_of_Shareholders_Equity\">Statements of Shareholders Equity<\/span><\/h3>\n\n\n\n<p>The shareholder equity table lists the beginning and ending balances of each equity account, as well as the current account changes. Simply put, shareholders&#8217; equity is determined by subtracting total liabilities from the company&#8217;s total assets.<\/p>\n\n\n\n<h2><span id=\"The_Purpose_of_Financial_Analysis\">The Purpose of Financial Analysis<\/span><\/h2>\n\n\n\n<p>The purpose of <strong><a rel=\"noreferrer noopener\" href=\"https:\/\/intl.finebi.com\/blog\/financial-analytics\" target=\"_blank\">financial analysis<\/a><\/strong> may vary among different people at different stages, but there is always a common goal, which is to obtain information useful to optimize their decision-making from financial statements. Therefore, financial analysis should always include three key objects:<strong> financial status, operating results and cash flow,<\/strong> and based on this constitute a general framework for financial analysis. What <a rel=\"noreferrer noopener\" href=\"https:\/\/www.finereport.com\/en\/data-analysis\/a-beginners-guide-to-financial-analysis.html\" target=\"_blank\">financial analysts<\/a> often need to do is<strong> solvency analysis, profitability analysis<\/strong> and <strong>operational capability analysis<\/strong>.<\/p>\n\n\n\n<p>For example, if you are interested in investing in a small business as one of the strategic alliances, you may be curious about its past and current financial situation, or you want to check their financial forecasts to infer its future earnings prospects.<\/p>\n\n\n\n<p>Compared with investors who focus on analyzing profitability, investment returns and investment risks, general creditors are more focused on analyzing the solvency of the company and assessing the financial security or risk of the company.<\/p>\n\n\n\n<p>When financial statements are used for <a rel=\"noreferrer noopener\" href=\"https:\/\/www.finereport.com\/en\/reporting-tools\/management-reporting.html\" target=\"_blank\">internal management<\/a>, the content is more extensive and diversified. It can be customized by analysts to help report users to summarize and evaluate the financial status and operating results of the enterprise and provide a reliable basis for making economic forecasts and decisions. In this case, financial statements are also called internal financial reports.<\/p>\n\n\n\n<h2><span id=\"Financial_Statement_vs_Financial_Reports\">Financial Statement vs Financial Reports<\/span><\/h2>\n\n\n\n<p>Compared with financial reports, a financial statement is more of formal status. The reason is that financial statements usually need to be reviewed by accountants, investors, government agencies or the public to ensure accuracy, as well as for tax, financing or investment purposes. &nbsp;Therefore, financial statements need to be adapted to a set of standards and rules which is so-called &nbsp;Generally Accepted Accounting Principles&nbsp;(GAAP).<\/p>\n\n\n\n<p>By contrast, <a href=\"https:\/\/www.fanruan.com\/en\/blog\/financial-reporting-tools\" target=\"_blank\" rel=\"noreferrer noopener\">financial reports<\/a> cover a wider range of definitions and practices. Generally speaking, financial reports are mainly for management use, so it is not compulsory to obey the rule. In a narrow sense, financial statements can be understood as the general designation of the four main types listed above, and financial reports can be an umbrella term covering financial statements and other customized reports that display financial information, such as dashboards.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" width=\"1024\" height=\"516\" src=\"https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2021\/01\/Financial-position-analysis-by-FineReport-1024x516.png\" alt=\"Financial position analysis- this is a typical financial report for internal management.\" class=\"wp-image-11481\" srcset=\"https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2021\/01\/Financial-position-analysis-by-FineReport-1024x516.png 1024w, https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2021\/01\/Financial-position-analysis-by-FineReport-300x151.png 300w, https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2021\/01\/Financial-position-analysis-by-FineReport-768x387.png 768w, https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2021\/01\/Financial-position-analysis-by-FineReport.png 1353w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><figcaption>Financial position analysis (by FineReport)<\/figcaption><\/figure>\n\n\n\n<div class=\"wp-block-buttons\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link has-vivid-cyan-blue-to-vivid-purple-gradient-background has-text-color has-background\" href=\"https:\/\/www.fanruan.com\/en\/demo\" style=\"border-radius:50px;color:#fffffa\" target=\"_blank\" rel=\"noreferrer noopener\"> Download the Template<\/a><\/div>\n<\/div>\n\n\n\n<p><\/p>\n\n\n\n<h2><span id=\"3_Basic_Steps_to_an_Effective_Financial_Analysis\">3 Basic Steps to an Effective Financial Analysis<\/span><\/h2>\n\n\n\n<h3><span id=\"1_Be_Clear_about_the_Most_Critical_in_Your_Financial_Analysis\">1. Be Clear about the Most Critical in Your Financial Analysis<\/span><\/h3>\n\n\n\n<p>Different roles in the company focus on different aspects of financial analysis.&nbsp; Therefore, identify the purpose of the company&#8217;s financial analysis and who is using the report to be clear about the most critical in your financial analysis report is the very first step at the beginning.<\/p>\n\n\n\n<h4>Operating Income<\/h4>\n\n\n\n<p>Operating income is the life of enterprises. When we get a report, we first need to analyze three aspects: the revenue composition, growth situation, and gross margin of the enterprise.<\/p>\n\n\n\n<ul><li><strong>Revenue Composition<\/strong>: include the sales mix, the proportion of regional revenue, the proportion of channel revenue, etc. It can be analyzed to find whether there are barriers to the products of the enterprise, whether the products can stand out from the competition, whether the core business is clear, and whether the profitability is stable, etc.<\/li><li><strong>Growth Situation:&nbsp;<\/strong>The most important thing you should pay attention to include the revenue growth rate, compound annual growth rate, sales growth, customer development growth, and product growth. Also, take care of whether m&amp;a growth, internal growth exists, etc.<\/li><li><strong>Gross margin:<\/strong>&nbsp;The gross margin represents how well are the products&#8217; differences, brand influence, and market competitiveness<\/li><\/ul>\n\n\n\n<h4>Fee Structure<\/h4>\n\n\n\n<ul><li><strong>R&amp; D cost analysis<\/strong>\uff1aFocus on the company&#8217;s investment in research and development over the years, and also pay attention to the direction of investment in R&amp;D;<\/li><li><strong>Sales cost analysis<\/strong>: Concentrate on the types of sales expenses, whether the company has established sales channels, incentive policies, etc.<\/li><li><strong>Financing cost analysis<\/strong>: include loans, internal financial consumption, interest, etc.<\/li><\/ul>\n\n\n\n<h4>Profit Structure<\/h4>\n\n\n\n<ul><li><strong>Valued Profit:&nbsp;<\/strong>If non-operating income, investment income, asset disposal income, interest income, gain from fair value changes account for a small proportion of the total profit composition of the company, the company&#8217;s profit is more valuable.<\/li><li><strong>Analysis of the relationship between net profit and net cash flow from operating activities:&nbsp;<\/strong>that is, whether the company&#8217;s net profit is supported by net cash from operating activities<\/li><li><strong>Analysis of profit growth:<\/strong>&nbsp;whether the company&#8217;s profit growth belongs to m&amp;a growth, whether the profit belongs to internal growth, etc.<\/li><\/ul>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><a href=\"http:\/\/www.finereport.com\/en\/wp-content\/uploads\/2019\/10\/2019102901I.png\"><img loading=\"lazy\" width=\"1024\" height=\"565\" src=\"https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2021\/01\/image-1-1024x565.png\" alt=\"Profit center -dashborad \" class=\"wp-image-11479\" srcset=\"https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2021\/01\/image-1-1024x565.png 1024w, https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2021\/01\/image-1-300x166.png 300w, https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2021\/01\/image-1-768x424.png 768w, https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2021\/01\/image-1-1536x848.png 1536w, https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2021\/01\/image-1.png 1708w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/a><figcaption>Profit center dashborad (by FineReport)<\/figcaption><\/figure><\/div>\n\n\n\n<blockquote class=\"wp-block-quote\"><p>These dashboard templates are built in FineReport. Download and Use them for Free!<\/p><\/blockquote>\n\n\n\n<p><a style=\"color: #fff; background-color: #2849f7; border: none; border-radius: 20px; width: 180px; height: 40px; font-size: 16px; line-height: 26px; display: inline-block; padding: 6px 12px; margin-bottom: 0; text-align: center;\" href=\"\/en\/activation\">Free Trial<\/a><\/p>\n\n\n\n<h3><span id=\"2_Select_Data_Analysis_Methods_for_Financial_Analysis\"><span data-preserver-spaces=\"true\">2. Select Data Analysis Methods for Financial Analysis<\/span><\/span><\/h3>\n\n\n\n<p>Data analysis is an excellent thinking mode in financial analysis to help companies to identify potential problems and opportunities, no matter how complex the real business scenario is. Start from a single core indicator, and decomposing this index, then conduct in-depth multi-dimensional analysis, and discover the abnormal data, to finally solve the business problem by adjusting the decision.<\/p>\n\n\n\n<h4>Vertical Analysis<\/h4>\n\n\n\n<p>Vertical analysis is a proportional analysis to analyze each amount on a financial statement as a percentage of another amount.<\/p>\n\n\n\n<ol><li>Step1: Calculate and determine the proportion or percentage of each item in the financial statement.<\/li><li>Step2: Through the proportion of each item, analyze its importance in enterprise management. The more significant the proportion of general projects is, the higher their importance is, and the greater the overall impact on the company is.<\/li><li>Step3: Compare the proportion of each project in the analysis period with the proportion of the same project in the earlier period, study the change of the proportion of each project, and further analyze the important projects that change a lot.<\/li><\/ol>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><a href=\"http:\/\/www.finereport.com\/en\/wp-content\/uploads\/2019\/10\/2019092409A.gif\"><img loading=\"lazy\" width=\"955\" height=\"473\" src=\"http:\/\/www.finereport.com\/en\/wp-content\/uploads\/2019\/10\/2019092409A.gif\" alt=\"Product Cost Analysis Report\" class=\"wp-image-8594\"\/><\/a><figcaption>Product Cost Analysis Report-From FineReport<\/figcaption><\/figure><\/div>\n\n\n\n<div class=\"wp-block-buttons\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link has-vivid-cyan-blue-to-vivid-purple-gradient-background has-text-color has-background\" href=\"https:\/\/www.fanruan.com\/en\/finereport\/download-trial-b\" style=\"border-radius:50px;color:#fffffa\" target=\"_blank\" rel=\"noreferrer noopener\">Try FineReport For Free<\/a><\/div>\n<\/div>\n\n\n\n<h4>Horizontal Analysis <\/h4>\n\n\n\n<p>Horizontal analysis is used to compare historical data over a number of accounting periods, comparing the data of each project reporting period in the financial statements with the data of the previous period, and analyzing the changes of the financial data of the enterprise.<\/p>\n\n\n\n<p>Generally, horizontal analysis is not used to compare just one or two items, but a comprehensive comparison and analysis of all items in the reporting period of financial statements and the previous period, revealing the problems in various aspects and laying the foundation for further comprehensive and in-depth analysis of the financial situation of enterprises.<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><a href=\"http:\/\/www.finereport.com\/en\/wp-content\/uploads\/2019\/09\/2019092606L.gif\"><img loading=\"lazy\" width=\"1191\" height=\"500\" src=\"http:\/\/www.finereport.com\/en\/wp-content\/uploads\/2019\/09\/2019092606L.gif\" alt=\"Horizontal Analysis\" class=\"wp-image-8087\"\/><\/a><figcaption>Horizontal Analysis -From FineReport<\/figcaption><\/figure><\/div>\n\n\n\n<h4>Trend Analysis <\/h4>\n\n\n\n<p>Trend analysis is a long-term analysis based on the concept that what has happened in the past gives an idea of what will happen in the future. It calculates the fixed-base index of data of one or more consecutive reporting periods compared with the base period, or the sequential index compared with the previous period. In this way, to form an index time series and analyze the long-term trend of this report.<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><a href=\"http:\/\/www.finereport.com\/en\/wp-content\/uploads\/2019\/10\/2019092403A.jpg\"><img loading=\"lazy\" width=\"720\" height=\"165\" src=\"http:\/\/www.finereport.com\/en\/wp-content\/uploads\/2019\/10\/2019092403A.jpg\" alt=\"Trend Analysis\" class=\"wp-image-8595\" srcset=\"https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2019\/10\/2019092403A.jpg 720w, https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2019\/10\/2019092403A-300x69.jpg 300w\" sizes=\"(max-width: 720px) 100vw, 720px\" \/><\/a><figcaption>From FineReport<\/figcaption><\/figure><\/div>\n\n\n\n<div class=\"wp-block-buttons\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link has-vivid-cyan-blue-to-vivid-purple-gradient-background has-text-color has-background\" href=\"https:\/\/www.fanruan.com\/en\/finereport\/download-trial-b\" style=\"border-radius:50px;color:#fffffa\" target=\"_blank\" rel=\"noreferrer noopener\">Try FineReport For Free<\/a><\/div>\n<\/div>\n\n\n\n<h4>Ratio Analysis <\/h4>\n\n\n\n<p>Ratio analysis is performed by comparing two items in the financial statements to analyze the relationship between two projects.<\/p>\n\n\n\n<p>Financial ratios generally fall into two categories: margin ratios and return ratios. The most commonly used in the company are gross profit margin, EBITDA margin, operating profit margin, net profit margin, cash flow margin, return on assets, return on equity and return on invested capital.<\/p>\n\n\n\n<h4>Factor Analysis <\/h4>\n\n\n\n<p>Factor analysis is used to calculate the degree of influence of several interrelated driving factors on comprehensive financial indicators. For example, sales revenue depends on two factors, sales volume and unit price. When an enterprise raises its price, sales volume will fall. We can use factor analysis to measure the impact of price rise and sales decline on revenue.<\/p>\n\n\n\n<h4>Comparative Analysis <\/h4>\n\n\n\n<p>The first is the comparative analysis of internal indicators. For example, the sales of various regions can be compared and analyzed. It can help to identify regions with relatively good sales performance, as well as summarize relevant experience for the optimization of regions with relatively poor sales performance.<\/p>\n\n\n\n<p>The second is to do a comparative analysis of the same indicators formed at different times. For instance, <a href=\"https:\/\/www.finereport.com\/en\/product-functions\/year-over-year-growth-calculate.html\" target=\"_blank\" rel=\"noreferrer noopener\">MoM and YoY <\/a>can be calculated for sales. With the warning icons, it can help to quick to detect the rise and decrease of sales and to find problems of enterprise management at the corresponding times.<\/p>\n\n\n\n<p>In addition to comparing the data of the enterprise itself, we can also compare and analyze with the main competitors, including competitiveness, financial ability, etc. It is conducive to clear the current level of their enterprises in the market, to finally choose enterprise management strategies that more suitable for them.&nbsp;<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><a href=\"http:\/\/www.finereport.com\/en\/wp-content\/uploads\/2019\/11\/2019111901I.gif\"><img loading=\"lazy\" width=\"1024\" height=\"550\" src=\"https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2019\/11\/2019111901I-1-1024x550.gif\" alt=\"\" class=\"wp-image-8760\" srcset=\"https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2019\/11\/2019111901I-1-1024x550.gif 1024w, https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2019\/11\/2019111901I-1-300x161.gif 300w, https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2019\/11\/2019111901I-1-768x412.gif 768w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/a><figcaption>YoY &amp;MoM<\/figcaption><\/figure><\/div>\n\n\n\n<div class=\"wp-block-buttons\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link has-vivid-cyan-blue-to-vivid-purple-gradient-background has-text-color has-background\" href=\"https:\/\/www.fanruan.com\/en\/finereport\/download-trial-b\" style=\"border-radius:50px;color:#fffffa\" target=\"_blank\" rel=\"noreferrer noopener\">Try FineReport For Free<\/a><\/div>\n<\/div>\n\n\n\n<h3><span id=\"3_Select_the_Right_Financial_Analysis_Tool\"><span data-preserver-spaces=\"true\">3. Select the Right Financial Analysis Tool<\/span><\/span><\/h3>\n\n\n\n<p>At present, in most enterprises, financial statement reports are made manually. It is common for finance staff to use Excel to make and manage financial reports. The data was collected and input first, and then the relevant calculation was made according to the presentation logic of the report. Finally, the chart was used to present the data analysis. However, the manual production of financial statements has many disadvantages. First of all, it is easy to make mistakes when making reports by inputting the data by hand, especially when the data is massive. And, you know, a small data error can make a big difference. Second, Excel causes duplication of effort, especially when it comes to daily reports, monthly reports, annual reports.&nbsp;<\/p>\n\n\n\n<p>For enterprises, the <a href=\"https:\/\/www.finereport.com\/en\/reporting-tools\/automated-reporting.html\">automated reporting software<\/a>\u00a0is more recommended to capture financial data in real-time and present the output visually. It can be used for financial personnel to analyze financial data at any time and for the managers to control the financial status and adjust the strategy timely. For example, with<a href=\"https:\/\/www.fanruan.com\/en\/finereport\" target=\"_blank\" rel=\"noreferrer noopener\"> FineReport<\/a>, which I used to make the reports are shown above, after I connect it to the MySQL and drag the field to the interface, the feature &#8216;dynamic calculation between cells&#8217; help me to dynamically generate MoM and YoY analysis without the need to input the formula. Besides, I can set the daily, monthly and yearly reports to automatically generate the financial reports based on the latest data from the database, without extra effort. It truly reduces my time and frees me for more subjective analysis.<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><a href=\"http:\/\/www.finereport.com\/en\/wp-content\/uploads\/2019\/10\/2019051608A.gif\"><img loading=\"lazy\" width=\"1024\" height=\"571\" src=\"https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2021\/03\/20210318C-1024x571.gif\" alt=\"Interactive Dashboard\" class=\"wp-image-11724\" srcset=\"https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2021\/03\/20210318C-1024x571.gif 1024w, https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2021\/03\/20210318C-300x167.gif 300w, https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2021\/03\/20210318C-768x428.gif 768w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/a><figcaption><a href=\"https:\/\/www.finereport.com\/en\/reporting-tools\/interactive-report.html\" target=\"_blank\" rel=\"noreferrer noopener\">Interactive Dashboard<\/a><\/figcaption><\/figure><\/div>\n\n\n\n<div class=\"wp-block-buttons\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link has-vivid-cyan-blue-to-vivid-purple-gradient-background has-text-color has-background\" href=\"https:\/\/www.fanruan.com\/en\/demo\" style=\"border-radius:50px;color:#fffffa\" target=\"_blank\" rel=\"noreferrer noopener\"> Download the Template<\/a><\/div>\n<\/div>\n\n\n\n<p><\/p>\n\n\n\n<h2><span id=\"Key_Takeaways_of_Financial_Analysis\">Key Takeaways of Financial Analysis<\/span><\/h2>\n\n\n\n<ul><li>Financial analysis is the process of analyzing a company&#8217;s financial statements for decision-making purposes.<\/li><li>Financial statements are the official records that show the company&#8217;s business activities and financial performance. Usually, a series of standard rules are practised when preparing financial statements. But this is not necessary for financial reporting.<\/li><li>Financial analysis can be logically divided into three steps. Before starting any financial analysis, the question of who is the target audience should be clarified.<\/li><\/ul>\n\n\n\n<p>Get more than 50 HTML5 charts and multiple templates tailored for financial analysis? Use FineReport now!<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><a href=\"https:\/\/www.fanruan.com\/en\/finereport\/download-trial-b\" target=\"_blank\" rel=\"noopener\"><img loading=\"lazy\" width=\"1024\" height=\"337\" src=\"https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2022\/05\/finereport-en-1024x337.png\" alt=\"Free Trial of FineReport\" class=\"wp-image-13464\" srcset=\"https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2022\/05\/finereport-en-1024x337.png 1024w, https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2022\/05\/finereport-en-300x99.png 300w, https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2022\/05\/finereport-en-768x253.png 768w, https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2022\/05\/finereport-en-1536x505.png 1536w, https:\/\/www.finereport.com\/en\/wp-content\/uploads\/2022\/05\/finereport-en.png 1720w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/a><\/figure>\n\n\n\n<p><a style=\"color: #fff; background-color: #2849f7; border: none; border-radius: 20px; width: 180px; height: 40px; font-size: 16px; line-height: 26px; display: inline-block; padding: 6px 12px; margin-bottom: 0; text-align: center;\" href=\"\/en\/activation\">Get Started<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>This article concludes 3 basic steps to an effective financial statement analysis for newbies, from definition to financial analysis methods and tools.<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[161],"tags":[129],"yst_prominent_words":[280,1970,6340,185,2449,404,1966,2460,1969,6645,6344,6647,6646,6644,371,6648,6364,6649,6643],"_links":{"self":[{"href":"https:\/\/www.finereport.com\/en\/wp-json\/wp\/v2\/posts\/8592"}],"collection":[{"href":"https:\/\/www.finereport.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.finereport.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.finereport.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.finereport.com\/en\/wp-json\/wp\/v2\/comments?post=8592"}],"version-history":[{"count":27,"href":"https:\/\/www.finereport.com\/en\/wp-json\/wp\/v2\/posts\/8592\/revisions"}],"predecessor-version":[{"id":19848,"href":"https:\/\/www.finereport.com\/en\/wp-json\/wp\/v2\/posts\/8592\/revisions\/19848"}],"wp:attachment":[{"href":"https:\/\/www.finereport.com\/en\/wp-json\/wp\/v2\/media?parent=8592"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.finereport.com\/en\/wp-json\/wp\/v2\/categories?post=8592"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.finereport.com\/en\/wp-json\/wp\/v2\/tags?post=8592"},{"taxonomy":"yst_prominent_words","embeddable":true,"href":"https:\/\/www.finereport.com\/en\/wp-json\/wp\/v2\/yst_prominent_words?post=8592"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}