10 Easy Steps to Write a Financial Analysis Report

Financial analysis refers to assessing and evaluating projects, businesses, and finance-related projects to determine their suitability, stability, viability, and performance. It is used to analyze if a business is solvent, liquid, stable, or profitable enough to carry out monetary investment. If you want capitalists to invest in your company, you need to explain why it’s worth the investment. The financial analysis report highlights the economic weaknesses and strengths of your business. We will discuss ten simple steps to writing a financial report.

10 Effective Steps to Write a Financial Analysis Report Easily

1. The title page

The title page is the first thing that should be on your financial analysis report. It first captures the attention of the reader. Ensure that you have the company name, the name of your report, and the financial year on the cover page. The title page is also where you add your credentials. Keep the title page organized, clean and concise.

2. Abstract

After the title page, we have the abstract where you state the research statement and purpose of the financial analysis. Most professional writing services similar to CustomWritings recommend students write the abstract after completing the paper. It is a summary of your report. It shows the reader an overview of the financial analysis, how and what was done, results and implications. You must write the abstract in the past tense and third person.

3. The introduction

The introduction section sets the background or context of the financial report analysis. Here, students may have a case study or a company to analyze.

The introduction discusses the various theories and financial accounts applied to draft the report. It adds credibility to your research.

4. Company overview

The company overview comes after the introduction, and it is a description of your business. It shows the present and potential scope of the company. The company overview helps investors understand the competitive business advantage, if your business is a worthy investment or not. You discuss the scale, size, and sector of the business. You can get relevant data from your business quarterly or annual financial statements, trade journals, and business studies.

5. Company strategies

Look at the nature of the product or service the company offers. Indicate the uniqueness of the product, creation of brand loyalty, level of profit margins, and control of costs. Here you should include geographic diversification, supply chain integration, and industry diversification.

6. Investment thesis

The investment thesis section addresses the advantages and disadvantages of investing in the business. An investment analysis includes reviewing a business’s liquidity, cash flow, and debt levels. It should give projections for how the information might change in the future. It would be best to detail your business financial statement analysis, growth trends, and how it compares to the competition. Consider elements like turnover ratios, significant efficiency ratios, return on investment (ROI), cash conversion cycle, and other financial components. Your analysis can define the likelihood of future financial success using past economic trends.

7. Valuation

The most important part of a financial analysis report is the valuation section. The section talks about the business are worth. You outline the assets and liabilities of the company. There are three methods for stock valuation, including discounted cash flow analysis, book value analysis, and relative value.

Discounted cash flow is the method of estimating the value of investments and stocks based on the business’s future cash flows. Using this method, you find a discount rate’s present value of expected future cash flow. To find book value, you compare the business’s book value to the stock’s current price. It can be seen as the net asset value (NAV) of a company, calculated as its total assets minus liabilities and intangible assets. Book value enables you to see if the stock is overvalued or undervalued. An asset’s book value is equal to its carrying value on the balance sheet. Book value is many times lower than a business or assets market value.

The relative value method compares your business’s key financial ratios and fundamental metrics to your competitors. The price-to-earnings ratio is added to the financial accounting analysis report. This ratio contrasts the market price of a company’s stock to its earnings per share.

8. Risk and gains analysis

In this section, you discuss the present and future risks of the business. Basic SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis might be an excellent way to start the risk and gains evaluation. You might also have to use alternative market evaluation methods since the SWOT analysis works on a microscopic level.

Students are advised to apply pestle analysis for a more comprehensive picture. With pestle analysis, students understand macro factors and the marketing environment affecting financial performance. The principal risks evaluations, losses, and gains also determine the enterprise’s market value, giving investors an idea about its investment potential.

Detail all key factors that may sabotage your business, considering that factors can differ from business to business. They can range from the loss of patent protection to the lack of supplies on a product or service. Consider looking at the type of industry to determine other potential hazards, such as the technology industry.

9. Final insights

After giving the financial position and detailed business analysis, you can move on to the last part of the report. This section presents your final perceptions about the business and whether it is at a loss or profit. Make sure to back up all your findings with accounts, factual data, and financial theories. You can also talk about the prospects of the business.

Suggest market trends and a few expansion strategies and their impact on the organization. It includes summaries of your financial statements and documents and incorporates interpretations of the statements using ratios, pie charts, and other graphs.

Consider including a summary or shortened version of the following financial statements; income, cash flow, and balance sheets. The data you include in the details section should support other information presented in your report. Summarize the key elements mentioned in the analysis.

10. Reference list.

The last section of the report is the reference list. Most universities give students specific instructions about citations, and they should be adhered to. If there are no special requirements, students should use APA in-text or Harvard referencing style. This is because these citation styles are better suited to statistical-based reports.

Conclusion

Preparing a financial accounting analysis report or financial analysis paper is not an easy task because you must adequately understand the practical and theoretical aspects of the booking. These steps will guide you on how to write a financial analysis report.