Financial Analysis

Financial analysis is the examination of financial information to reach business decisions. This analysis typically results in the reallocation of resources to or from a business or a specific internal operation.

Purpose of Financial Analysis:

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Individual investors or firms that are interested in investing in small businesses use financial analysis techniques in evaluating target companies' financial information. By examining past and current financial statements -- balance sheets, income statements and cash flow statements -- potential investors can form opinions about investment value and expectations of future performance. Financial analysis can also assist small-business owners as they weigh the effect of certain decisions, such as borrowing, on their own companies.

Objectives of Financial Statement Analysis:

Creditors and investors, as well as managers, use financial statement analysis to judge the past performance and current position of a company, and also to judge its future potential and the risk associated with it. Creditors use the information gained from their analysis to make reliable loans that will be repaid with interest. Investors use the information to make investments that will provide a return that is worth the risk.

• Provide objective, actionable analysis to support informed recommendations and decision-making by both the WTOP and Town management.

• Assess the cash flow implications of a range of operating scenarios.

• Provide tools to support the discussion of restoring the project’s financial integrity so that funds are available when the need for repair arises.

• Compare the 2008 and 2012 analyses so that changes are transparent and available for discussion.

• Provide detailed assumptions to facilitate WTOP committee and Town due diligence

• Support the FY2014 Budget Planning Process


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Article by
School of Management Sciences,
Nalla Narasimha Reddy Group - NNRG