The company analysis answers vital questions regarding the company’s risks, liquidity, asset value, profit growth, and cash flows. Since it gives the overall picture of the company, it is referred to as fundamental analysis.
The company analysis helps ascertain various aspects of a company’s health. Usually presented in a written format, the analysis focuses on:
These three factors built into the company’s strengths, weaknesses, and immediate threats. Thereby, it helps the company take the necessary steps to handle any unfavourable situations and use positive outcomes to their maximum benefit.
The company analysis can be for internal consumption, as well as for the benefit of stakeholders.
The contents of the company analysis depend on the objective for the comprehensive study. For instance, does the company want to understand the sales growth of the company? Or does a potential investor want an insight into the financial health? Let’s look at the common things analysed:
The financial analysis includes an examination of financial records for a period of three to five years. A financial analysis is important to understand the financial health of the company.
For instance, while the company might be generating profits, it does not necessarily mean positive cash flows. The cash flow analysis is required to understand the availability of cash, and if the profitable business can pay its bills.
Analysis of financial status typically includes:
Cash flow analysis statement will show where the money from the net operating activities is going and highlights how much of that money is going out for the business.
The factors such human resources employment and time of productively are analysed to determine the operating efficiency of an organisation.
Performance indicators vary from company to company, but the overall idea is to see if each of the operating departments meet their targets. This measures shortfalls and budgetary surpluses. In a business, shortfalls don’t always indicate slack in personnel, it could also mean that particular processes might need to be revamped.
The MoSCoW analysis is a popular tool to analyse the task priority in an operating cycle. It helps the business understand the roles and requirement of each component in the operating cycle. The ‘Must haves’, ‘Should haves’, ‘Won’t haves’ and ‘Could haves’ of each of these components are analysed to ascertain operating bottles necks and where processes can be improved.
An analysis of the external factors looks at the various threats that affect the company from the outside.
A SWOT analysis focusing on highlighting the core strengths, weaknesses to mitigate, prospective opportunities, and immediate threats of a company. It provides a perspective on where the company must be focusing its efforts, what it can avoid, and how to handle external risks.