Six Basic Tips on Writing a Financial Analysis Paper

Why do students learn to write a financial analysis paper? This assignment helps students improve their knowledge about the structure of every company. If they decide to found their own firm, they should know how to manage its financial health. This knowledge is vital for investors too. If they analyze the financial condition of the specific company correctly, they will be able to invest in this company without any negative consequences. If you devote your money to a venture, you should know whether it is safe and reliable. A professional financial analysis is able to display the actual financial condition of the particular company. If you want to learn how to complete a factual financial analysis paper, dwell on these basic writing tips.

Tip #1: Analyze the Existing Financial Statements

The foremost duty of everyone who wants to cope with a detailed financial analysis is to obtain financial statements. If you analyze a specific company suggested by the teacher, you can find its financial statements in the Internet or in the definite books on business and accounting. If you are ambitious to research a completely different firm, you can receive these documents directly from its owner. Of course, this job is often complicated. Nevertheless, if you have had your practice at the chosen company, you can receive at least several financial statements devoted to the certain period in the past. There is hardly a boss who will supply you with the relevant information of this kind. Bear in mind that a financial statement is a complex document that embraces numerous minor documents, like a balance sheet, an income statement, an equity statement and a cash flow statement. You will have to look through and analyze every document in order to complete a full financial analysis paper

Tip #2: Look over a Balance Sheet

A balance sheet is the document that demonstrates the balance between such elements as assets, liabilities and owner’s equity. This balance is paramount for the objective survey of the specific firm. You should know about its assets and debts. Moreover, you ought to examine the shareholder equity. It is smart to pay attention to any shifts in this balance in order to find the weak sides of the company. It is a bad signal when a company loses its assets and increases its debt without any objective reasons.

Tip #3: Inspect an Income Statement

This statement shows the income and loss of a company’s capital. A common successful company has a tendency of the gradual increase of its income indicator. When you notice the reduction of the firm’s revenue, it means that it is close to crisis and bankruptcy. Such firms are unreliable and require reorganization and alteration of their business strategy.

Tip #4: Observe a Statement of Changes in Equity

This statement concentrates on the analysis of the changes that have occurred within the shareholder’s equity. It is vital to know whether a company purchases new stocks or not. It can illustrate its future plans for the further development. The owner’s equity can be measured in the easiest way. You ought to subtract the liabilities from the assets. If the sum of the equity is gradually reducing, it is a bad sign for the financial health of the specific firm.

Tip #5: Study a Cash Flow Statement

A cash flow statement resembles an income statement. However, there is a slight difference between these documents. A cash flow statement can be more useful for the objective and scrupulous survey of a company’s financial condition. This statement contains the precise facts concerning the sum of the money a company actually possesses. Furthermore, it demonstrates all expenses and profits. It shows the sources of cash flow. You can learn about the ways a company receives its profit. A cash flow statement is one of the documents that can prove the guilt of a cheating and unfair entrepreneur.

Tip #6: Calculate a Company’s Ratio and Competitiveness

When you want to capture the actual financial condition of a peculiar firm, you ought to calculate its financial ratio analyzing all financial statements and their components. You can compare the results with the ratios of other companies of the same sector on the market. If the ratio increases, it means that a company copes with the obstacles and accumulates cash. If a company possesses a reducing ratio, its competitiveness on the market falls down. Bear in mind that you cannot compare two companies if you do not conduct financial analysis papers for both of them. Thus, students do not need to compare ratios and performance of several companies. They just need to look over the financial health of a one particular firm to demonstrate their knowledge about the basic process of financial analysis paper writing in college and universty.