This Essay article Discussion the 10 Problems Existing in Business Financial Analysis Example. Due to the rapid changes in the operating environment of businesses, the diversification of demand, goal orientation and analysis methods, and the participation of multi-department and multi-level personnel, some businesses do not pay attention to financial analysis, financial analysis cannot identify needs, positioning is unclear, and the Guiding the future, failing to find benchmarks for comparison, not considering risks, ignoring capital costs, not incorporating non-financial indicators, lacking dynamic analysis, and not analyzing the overall ten major problems.
Here are the articles to explain, the 10 Problems Existing in Business Financial Analysis Example!
The process of solving these problems is the process of emancipating the mind, raising awareness, changing functions, identifying the position, and serving the development strategy of the business’s accounting work. You may also like to know about ERP systems in Financial Management Essay.
Business financial analysis example refers to the professional analysis of the production, operation, and financial activities of the business according to the different purposes of information use, starting from the financial point of view, comparing the objectives and benchmark indicators, revealing the differences between the results of the activities and the objectives, and exploring the driving factors for the differences. , the process of proposing alternative solutions.
Due to the rapid changes in the operating environment of businesses, the diversification of demand, goal orientation, and analysis methods, as well as the participation of multi-department and multi-level personnel, some businesses have some problems in financial analysis. This paper puts forward ten common questions, hoping to inspire the financial analysis work of businesses.
The following 10 common problems in business financial analysis example below are;
Problem 1: Emphasis on accounting and light on financial analysis.
At present, China is still in a period of economic transition. On the one hand, due to market and own reasons, some investors’ investment decisions and managers’ management decisions seldom rely on financial information support, resulting in an insufficient demand for financial information from users.
On the other hand, due to corporate accounting standards and institutional adjustments Frequently, to keep up with the changes, the accounting personnel of most business fails to properly handle the relationship between the adjustment of corporate accounting and accounting work, service, operation, and management, and spend a lot of time and energy on learning new standards, new systems and adjustments.
In the accounting system and accounting information system, there is little time for financial analysis, so it is difficult to provide effective financial information products for business decision-makers through financial analysis. Under the circumstance that accounting stands handled by the standards imposed by the state. And the demand and supply of businesses for financial analysis are insufficient. Most businesses still emphasize accounting and neglect financial analysis.
Problem 2: I can’t find the demand, and I don’t know who to serve.
In reality, some corporate financial personnel do not know or fully understand the needs of relevant parties for accounting work, which makes them unclear who the accounting work should serve. It reflects in the financial analysis that they are not clear who should provide financial services. Analyze products and what products should offer.
The financial departments of these companies do not use to connect with business units. And stand used to operating from the headquarters, positioning the department as a condescending functional department of the headquarters, not knowing the “customers” of financial analysis, and unwilling to provide personalized financial services for business departments. need. One mode of financial analysis goes all over the world, and only one financial analysis product produces. Business Financial Analysis Example reports are professionally obscure and difficult to understand.
Problem 3: The positioning is unclear and the function is unclear.
Some businesses have an unclear understanding of the positioning and function of financial analysis, unilaterally attach importance to business financial analysis examples, analyze very carefully, and the problems prompted by the analysis results are also in place. However, after the analysis, there is no more. They mistake financial analysis as the core of strategy execution analysis rather than strategy and strategic action plans. As a result, more and more problems stand found in financial analysis. And the role of financial analysis seems to be more and more important. But the company is still taking the old road, and the strategy execution may deviate from the target, or there are many difficulties.
Problem 4: Only examine the past, not guide the future.
Affected by the manager’s controlling thinking habits, some businesses stand accustomed to financial analysis and inspection of the activities that have stood completed, unchanged, and have resulted in the past, but cannot analyze and communicate based on the past, combined with the present, and focus on the future. Financial analysis that does not serve the future will only find past problems and be content with what has existed achieved.
In the collection and processing of information. The financial analysis of these businesses is mainly based on internal and static information. And rarely uses dynamic environmental information provided by external competitors. So the financial analysis results cannot stand used for dynamic adjustment of corporate strategies. Guidance and help, then it is unknown whether it is Sunshine Avenue or thorny bushes that go down this road.
Problem 5: I can’t find a benchmark, I don’t know the pros and cons.
Because there is no strategy, the strategy is not clear. Or the strategy has not existed and transformed into an executable standard. Some companies are not clear about the industry competition. Do not find or find external benchmarks, and do not analyze or analyze their strengths and weaknesses. There are no opportunities and threats. Internally, there is a lack of a clear marching line and stage goal to reach the strategic goal. And it is not even clear which stage the company has reached.
The result of not being able to find an external benchmark is accustomed to self-comparison. Accustomed to comparing the company’s plan, compared with the same period in the past. Whether there is a problem with the plan and the past or the current problem, is unknown. If there is no correct comparison, there will be no real motivation, and the correct direction cannot be found.
Problem 6: Does not consider risks, or is too conservative.
Some businesses lack risk awareness and do not conduct risk analysis in decision-making. In the past, they were lucky and courageous. They never considered or rarely considered risks in financial analysis, and did not make risk adjustments to the analysis results. As a result, the decision-making level of the business exaggerates its capabilities. Likes to impact small probability events, and cannot see the abyss ahead.
When the risk becomes a loss, the business has fallen into a situation where it is impossible to recover from redemption. Due to the lack of a correct understanding of risks, some businesses are afraid of risks, or lack a risk management system and a risk responsibility system, can’t see the opportunities hidden in the risks, and miss the development opportunities, so that the backwardness will be eliminated.
Problem 7: Excluding capital costs, affects efficiency.
Some businesses have deep pockets and large stalls, especially some monopoly businesses. Project analysis and internal accounting do not take into account the cost of capital occupation. And the business units that occupy a large amount of capital in the business are a burden to contribute. To become bigger, such businesses sometimes acquire a large number of low-profit businesses regardless of capital cost. Although these businesses have been profitable for many years. The return on net assets is much lower than the market interest rate. Occupying a lot of resources of shareholders and society to operate inefficiently.
Problem 8: Emphasis on financial indicators and light on non-financial indicators.
Although the assumption of monetary measurement provides the convenience of processing corporate information for accounting work. It also tends to make some companies only focus on the results and ignore the process. Some companies focus on the analysis of financial indicators and neglect the analysis of non-financial indicators. The process of analysis is from large results to small results; only numerical results are obtained. But the connotation of the numbers is not clear, and the driving factors for the results can never be found. And no problem-solving is involved in an action plan.
Businesses based on value management tend to reduce costs and strengthen asset structure and other more accessible goals. They often ignore the influence of many external uncontrollable factors. They are difficult to measure in monetary terms and omit some non-monetary external strategic information. The response to threats and opportunities is slow; the internal evaluation is only based on financial indicators. And the new business with core competitiveness that is related to the long-term development of the business is rejected.
Problem 9: Used to use static analysis, lack of dynamic analysis.
Some businesses are accustomed to using static thinking, static business development strategy, static market environment, static production and operation plan, and static employee needs and abilities to conduct static analysis of businesses. These companies seldom pay attention to external and internal changes, seldom dynamically revise and improve their strategic planning, and seldom adjust their action plans. Therefore, it is difficult to keep up with the times, keep pace with the times, and keep pace with the times.
Problem 10: Without dissecting the whole, the individual analysis is insufficient.
Some large businesses and large groups are getting bigger and bigger, and their financial analysis is becoming more and more macroscopic. They did not conduct a financial analysis of each branch center, business process, and operation unit of the business like dissecting sparrows, so they could not analyze the strategic contribution of individuals, so it was difficult to tap and cultivate the core competitiveness of the business; If the analysis is not objective and in place, it will lead to the phenomenon of inefficient crowding out the resources of strategic units and efficient divisions, and the inefficiency of the overall resource allocation of the business will ultimately affect the overall efficiency of the business.
The above 10 problems exist more or less in the financial analysis of most businesses, and the process of solving these ten problems will also be to emancipate the mind, raise awareness, change functions, identify positioning, and serve the development strategy of businesses in the accounting work of business. At the same time, it is also a process for businesses to correctly use financial analysis and scientific and refined management.