Analysis and administrative review of a company

Introduction

Throughout the various chapters, we have seen the different aspects of the creation of the company, its organization, both legal and operational, the different control systems, and age (and the market) and human relations.

In this chapter we focus on how we can study the company revolution, its economic-financial situation and, ultimately, its ability to act efficiently in the market in which it participates.

To carry out this analysis, it is necessary to have a series of information on the historical revolution of the company. On the one hand we have the financial statements (balance sheets and profit and loss accounts), on the other the legal aspects, such as a form it has adopted, and also the area of activity in which it has developed.

Abstract

Throughout the various chapters, we have seen the different aspects that mark the creation of the company, its organization, both legal and operational, the different control systems, and age (and the market), and human relations.

In this chapter we focus on how we can study the revolution of the company, its financial situation and, ultimately, its ability to act efficiently in the market in which it participates.

For this analysis it is necessary to have a range of information about the historical revolution of the company. On the one hand we have the financial statements (balance sheets and profit and loss accounts), other legal issues, such as a way that it has adopted, and also the area of activity in which it has evolved.

Development

Items to be used for legal review

To carry out this analysis it is necessary to compile the legal history of the company since its incorporation. We must study its legal form, its statutes, its changes in the management framework, verify if there has been an individual or collective body.

Physical implantation

In this section we must focus our attention on the place in which the activity of the company has developed over the years: if there have been changes in the location of the company, if there have been reforms or expansions of the plant or commercial premises, if there have been openings of other centers or premises and in one of these cases. If this has been due to a growth in turnover or an expansion or diversification of its activities.

Economic-financial analysis

Both the legal revolution of the company and that of its physical situation provide a frame of reference that allows a more adequate interpretation of the economic-financial analysis.

There is no doubt that any decision in legal / corporate matters or a change in geographic location or expansion, be it in industrial or commercial plants, the creation of delegations or branches, must have some kind of economic and financial recovery. Even buying various exercises does not offer the possibility of reaching valid conclusions but they are contrasted with their physical and legal evolution.

Economic financial analysis

Interpretation and comparison of financial statements

To interpret the financial statements it is necessary to review a series of concepts. We know that the balance sheet is structured in two parts: assets and liabilities.

We also know that both assets and liabilities are made up of various items that can be grouped according to their greater or less liquidity, that is, availability or their distance from it, in terms of assets, in terms of their degree of enforceability in terms of regarding liabilities.

The ratios or indices in companies

When buying two financial elements we can look for two different types of valuations: on the one hand we can study the existing ratio between the values, which leads us to a structural approach, we can check their evolution over time, which leads us to an evaluation of the own company asset.

Profitability analysis

This type of analysis aims to determine what is the framework in which companies are to face the future.

Analysis of the return on total assets

Return on total assets Profit margin on sales Rotation of total assets

Analysis of financial autonomy

The level of autonomy is determined by the following equation:

(Own funds / Total assets) = X 100

Solvency analysis

This type of analysis is of great value, since both providers and lenders take it as a basis for the reliability of the company.

Study of current or current assets

Maintaining adequate control of these assets is vitally important, as it ultimately brings together the elements that are the operating base of the company.

Analysis of financial and investment management

As we have mentioned in appropriate points, in order to achieve its objectives, the company needs to have fixed assets. In the course of his life there are extensions, renovations and technological adaptation. This implies that there is an investment constant that must be evaluated.

Economic analysis

The economic analysis is based on the evolution of the relationships between sales, their costs and the rest of the company's expenses.

conclusion

As we have already mentioned, the main objective of a for-profit company is the maximization of economic results, obtaining the highest possible profitability to pay back the invested capital. But, from the point of view of the company, profitability is the sum of all the benefits it generates and is conditioned not only in a direct way by income and expenses, but also by its financial structure.

The degree of effectiveness of the administration of the company's assets, the operational management of the stocks and accounts receivable, the balance between obtaining liquidity and the payment of commitments, the cost of foreign capital make up a balance and a type interrelationships that are measurable and evaluable. That is why, by using comparative financial statements, grouped into clear and perfectly defined asset groups, we will obtain a first approximation not only to the situation of a company at a given moment, but also to its evolution over several years. social.

Incorporating the analysis by means of the ratios or indexes, we can penetrate into the management aspects and the evaluation of the results of the decisions that have been adapted in the company in the period of time studied.