Financial analysis
Financial Analysis
A crucial part of a business valuation is the financial analysis. Understanding how the business has performed historically and is current performing.
From the financial analysis we are creating a picture of how we expect the business to perform in the future and what assets will be required.
Financial Performance Analysis
A typical historical financial analysis includes analysing at least the last five years of operations and assessing trends and comparative information.
Trend analysis
The analysis includes understanding trends, such as:
- Annual and monthly total revenue trend
- Annual and monthly revenue by customer trend
- Annual and monthly gross profit margin trend
- Key variable and overhead expense trend
Comparative analysis
Current financial performance analysis includes:
- Comparing performance on a seasonal basis
- Comparing performance to industry benchmarks
- Comparing past and current performance with forecasts and budgets
Balance Sheet Analysis
Balance sheet analysis includes an assessment of what is required to generated the earnings in the business and includes assessing:
- Past and current fixed asset and depreciation schedules
- Annual and monthly working capital
- Inventory and work in progress schedules
- Current levels of debts and related party loans
- Financial instruments such as preference shares, convertible notes and options
- Comparisons with industry levels of debt
- Levels of receivables
- Contingent assets and liabilities
- Provisions, such as long service leave and sick leave
- Any assets and liabilities not required to operated the business