Corporate finance - published: 27/08/2010

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Corporate finance - published: 27/08/2010

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Abstract

A financial analysis allows an abstract transcription of the actual situation of a company at any given time. It is a rigorous and efficient tool based on the study of economic data and accounting, that focuses on a holistic view of the company. The analyst can place a view inside or outside the company and his responsibility is to reconstruct its policies bearing in mind the result of a compromise between different concerns.

Introduction
The forms of financial crisis
1. Trend analysis
2. Comparative analysis
3. The normative analysis
The principle method of scoring or credit scoring
The strategic area of a financial analysis
An income statement
Evolution of financial analysis
Conclusion

Extract

[...] It was after this intellectual approach that the financial analysis realized its full extent with the assessment of strategic risks taken by the company through normalized means. There are three main approaches to performing this analysis. The first is the principle method of scoring or credit scoring, which aims to prevent the company's difficulties in establishing ratios which are then compared with ratios of other companies that have experienced difficulties or failures. This method was first developed in the United States by E. [...]

[...] business is simply more or less viable than others. This method has two limitations. Firstly, the concept of area is very vague and it is necessary that the selected sample is representative enough to be effective. Besides, the analyst must deal with "the phenomena of collective madness" that skews the values of the sector, as was observed with some pharmaceutical companies in 1997. The final method used is called the normative analysis that follows the rules of so-called "orthodoxy." Extending that method of analysis, this analysis is based on the comparison of ratios or balances of the company relative to standards determined from a large sample of companies. [...]

[...] Needs and resources in the period were privileged and the main concern was finding the means to finance the growth of the company. New tools were emerging such as the operating cash surplus, balance or functional need for working capital. In the late 80s, the financial analysis in the context of the market emerged for the first time corresponding to increased competition and the use of markets to finance investments. The analysis focused on earnings and profitability with tools such as EBITDA, the chisel impact chisel and the debt or the leverage. [...]

[...] The rating is the result of a long and tedious process that seeks to assess the business risk by analyzing its position compared to its competitors and performing a financial analysis. In addition to the accounting field described above, a financial analysis also includes the strategic area. In other words, the financial analysis is also concerned with the strategic position of the company that cannot, by definition, be ephemeral. This strategic area is studied through the analysis of the income statement. [...]

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