FINANCIAL DIAGNOSIS
Internal and external company analysis
What it is for?
Financial diagnosis is used to identify the strengths and weaknesses of the company, evaluate last year’s management activities in order to understand the business situation on the economic environment, and recognize financial and commercial strategies which will help to transform and evolve your company’s finance.
Furthermore, it works as a point of reference to compare the company against its competition.
Reasons to realize a financial diagnosis
- Evaluate board of directors management of the company
- Decision making
- Strategic and commercial objectives creation
- Presentation of results to the board of directors
How it is modeled?
In order to develop the financial diagnosis, it is very important to initiate with a market analysis to know the economic context of the industry, and understand how the company has been evolving against its competitors, also to comprehend the market niche evolution.
After that, the historical financial statements are analyzed, where the changes of the items are observed and the affectation on the composition of the financial statements are measured. Then, the most relevant financial indicators are analyzed for the respective organization (liquidity, debt, profitability, value generation, among others). Each indicator is analyzed individually and historically.
These results, the scope of the taken decisions is measured in order to determine accomplishable objectives, and generate a business plan for them, besides recognizing risk exposition and establishing strategies for its mitigation.
Negative effects of not doing a financial diagnosis
When if a financial diagnosis of a company is not done, there will be uncertainty about what was the scope obtained from the corporate decisions, further more, there will not be solid criteria to make accurate future corporate choices.
With that in mind, executive directors could focus on short term success, and that possibly will create unexpected affectations on the assets or in the company’s operation on the long term, causing liquidity problems, improper debt acquisition and in extreme cases, bankruptcy.
Why Quae Solutions?
