Ahmed Nashaat on Three Kinds of Financial Analysis Strategies

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Business in Thunder Bay

LONDON – BUSINESS – A financial analysis is completed by taking the financial statements of a business to determine their current financial position and how they performed in the past. There are a number of Key performance indicators that experts such as Ahmed Nashaat will use for this, including solvency, profitability, and liquidity. These types of indicators reveal the strengths and weaknesses of business entities. There are three main types of financial analyses that can be conducted, and they can be conducted either internally or externally.

Ahmed Nashaat’s #1 Strategy – The Horizontal Analysis

Here, the relative changes of very particular items within a financial statement, over a very particular period of time are assessed and compared. This could be things such as revenue and sales, and the time period could be something like years, quarters, or months. This is most suitable when a business wants to know how a certain item behaves and whether there are any positive or negative trends associated with it. The analysis can be done as a percentage, which provides a relative figure, or as an absolute, which provides an actual figure.

Ahmed Nashaat’s #2 Strategy – The Vertical Analysis

In a vertical analysis, which many strategists call the “common size analysis”, figures of varying items are compared to a balance sheets standard item, still using a specific time period. So, for instance, if the 100% value is the total revenue during a certain accounting period, a vertical analysis can calculate what percentage of this is spent on debt repayment, marketing, or employee benefits. This is a useful type of analysis when businesses need to know how much of their income is spent on different things and whether that is excessive or not.

Ahmed Nashaat’s #3 Strategy – The Ratio Analysis

Last but not least, there is the ratio analysis in which different elements included on the balance sheet are compared to the firm’s overall income statement. It enables them to see how well they are performing financially, in other words. There are various liabilities and assets included in these statements, which are presented in a simplified manner instead of using long and complex figures. This analysis is most useful when a business needs to determine whether they are sustainable and viable in both the long and short term, something that stakeholders and shareholders often need to know.

These are the three main types of financial analyses that strategists such as Ahmed Nashaat rely on if they want to determine the financial strength of an organization. Each has its own merit, and it is quite common for multiple analyses to be used at the same time, thereby creating an overall picture. Additionally, different departments and stakeholders often have an interest in the results of one analysis above the other three. It is very important that these analyses are completed by a trained individual, preferably a CPA (Chartered Public Accountant), as they have the greatest understanding of the different financial implications associated with each analysis.

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