Financial Analysis

Financial Analysis

Introduction

This report deals with the detailed analysis of Competition Bikes, Inc. by using various procedures of analysis. However, before we get into the detail of financial analysis of the company, we should understand the importance of Financial Analysis and its basic users. The process of financial analysis is based on the application of tools and a set of techniques that apply to the financial statements and other supplemental data, in order to obtain quantitative measures and relationships that indicate the behavior not only of economic entity but also some of its most significant and important variables.

The management of financial analysis phase develops at different stages and process serves several objectives. First, data conversion can be considered its most important function, then, can be used as a selection tool, forecast or prediction, culminating with the fundamental diagnosis and evaluation functions. Financial analysis techniques contribute, therefore, to obtain the goals assigned to any management financial management system, to provide the indicator area manager and other tools to track permanent and make decisions about issues such as survival, avoiding risks of loss or insolvency, compete effectively, maximize market share, minimize costs, maximize profits, add value to the company, maintaining a steady growth in profits, and maximize the unit value of the shares.

Financial analysis is a very useful technique for the interpretation of accounting information produced by the economic entities that the user group that has come to him virtually unlimited coverage. However, it is customary to classify these users in the following groups; credit grantors, investors, managers and administrators, government entities, risk rating agencies, insurance companies, brokerage analysts, analysts for mergers and acquisitions, workers' unions, and general audience. Each of these groups of persons or entities interested in the results obtained through the financial analysis, draws attention to some of the elements and indicators calculated, taking into account the particular objective sought. However, other indices are useful for all groups regardless of individual purposes.

Task 1

Just as it is clear from the definition of financial analysis done above, these techniques and tools can be confused with what is the financial information. So explaining the objectives of financial analysis cannot be done without involving the purposes of financial reporting.

These objectives pursued basically report on the economic situation of the company, the results of operations and changes in its financial position for the various users of financial information to:

Learn, explore, compare and analyze trends of different financial variables involved or are the product of the economic transactions of an enterprise;

Evaluate the financial position of the organization, i.e., solvency and liquidity and its ability to generate resources;

Check the consistency of the data reported in the financial statements and structural economic reality of the company;

Investment decisions and credit, in order to ensure cost effectiveness and recoverability;

Determining the origin and nature of the financial resources of the company: they come from, how they are invested and generate performance or can be expected of them;

Rate managing directors and managers, through comprehensive assessments on how their assets are managed ...