What is financial analysis?

Financial analysis, also known as financial statement analysis, is a management work that comprehensively compares and evaluates the financial status, operating results and cash flow of enterprises by collecting and sorting out the relevant data in the financial accounting reports of enterprises and combining with other relevant supplementary materials, so as to provide management decision-making and control basis for users of financial accounting reports.

The purpose of financial analysis is restricted by the subject of financial analysis, and the purpose of financial analysis is different for different subjects of financial analysis.

The general purpose of financial analysis can be summarized as: evaluating the past business performance, measuring the current financial situation and predicting the future development trend. According to the specific purpose of analysis, financial analysis can be divided into liquidity analysis, profitability analysis, financial risk analysis and thematic analysis (such as bankruptcy analysis and auditor's analysis and inspection procedures).

Lines: Since the subject of financial analysis is so important, let's take a look at the subject of financial analysis:

1. Investor: refers to the equity investor of the company, that is, the common shareholders. Their concerns include solvency, profitability and risk.

2. Creditor: refers to the person who lends money to the enterprise and obtains the repayment commitment from the enterprise. Creditors are concerned about whether the enterprise has the ability to repay its debts.

3. Manager: refers to a group of individuals employed by the owner to manage the assets and liabilities of the company, sometimes called "management authority". He cares about the company's financial situation, profitability and sustainable development ability.

4. Government agencies: including tax departments, state-owned enterprise management departments, securities management institutions, accounting supervision institutions and social security departments. They use financial statements to perform their supervisory and management duties.

5. Others: employees, intermediaries (auditors, consultants), etc. Auditors can determine the focus of the audit through financial analysis.