In Mexico, Small and medium-sized companies fulfill an important factor for the country's national economy, since their contribution is innumerable, since they offer and produce goods and services, demanding and buying products, generating jobs, thereby providing some stability to the labor market.
They also have the ability to present enormous flexibility to market changes and to generate innovative projects.
Today, due to the tax burden and that this group of companies usually affects even more with ISR, IETU and IDE taxes that the Secretary of Finance and Public Credit obliges, far from promoting the development of these businesses that make a great contribution to our country, it is even more difficult to focus on the financial aspect of our business or company, that is to say that the financial approach is little studied so all entrepreneurs would like to know at a glance if:
- Are we producing optimally? How much profit do we generate? Is it necessary to request some source of financing to produce better in the company? How much to invest? Where is it more convenient to apply for credits? What is the term that most suits me?
These are the typical questions that most entrepreneurs are exposed to doubts, for more than 25 years the famous financial indicators have existed which are a great tool for SMEs but it should be noted that their effectiveness depends on the reality in accounting information, in other words, that this information is truthful and above all that it complies with the established financial information standards, which is why it is required to have an excellent information system that helps us determine the data we need to know.
That is why we will begin to define “Financial Analysis”, it is the study that is made of accounting information using indicators and financial ratios.
The ability of a manager to improve the value of a company for its owners depends on the effectiveness with which this person can manage assets, increase sales while controlling expenses, and using financial leverage.
The deficiencies in the analysis of reasons are sometimes not so much due to the lack of the reasons themselves, but rather to the analyst who misuses them.
We must know the basic financial statements that will help us to carry out a financial analysis:
- Balance sheet (information regarding a specific date on the entity's resources and financial obligations) Statement of income (information regarding the result of its operations in a period of income, expenses) Statement of cash flow (changes in resources and the sources of financing of the entities in a period classified by operating, financing and investment activities) Statement of changes in stockholders' equity (changes in the investment of shareholders or owners during the period.
These indicators will have to be carried out in comparisons of either two or three years to measure the level of increases and decreases in our Assets and Liabilities, Income, Expenses and our profits.
However, once the financial statements have been prepared, it will be necessary to know the financial ratios or better known as the most useful financial ratios in SMEs. We could divide them into 4 important aspects.
- Liquidity Indebtedness Profitability Coverage
These will help us to determine the liquidity, solvency, stability, solidity and profitability in addition to the permanence of their inventories in storage, the periods of collection of clients and payment to suppliers, to measure the productivity and profitability with which we are operating and other factors that serve to widely analyze the economic and financial situation of a company. It also allows to detect:
- Weaknesses in the company Detect anomalies Form a judgment for decision making
We must take into account that for each company the indicators to be applied will depend on the type of company, whether it is a commercialization or goods company, so it is necessary to know how to apply the indicators to each one.
The relevant points for the efficiency of financial analysis
- Detect weaknesses of the company to further study the problem and be able to correctly apply financial ratios. Apply more efficient inventory methods according to the needs of the company. Carry adequate accounting control in a timely and truthful manner.
Bibliography
- CP Juan Carlos Román Fuentes. Basic financial statements. ISEF Editorial. 2006.Javier Romero López. Accounting principles. Mc Graw Hill. Second edition. Mexico 2002. Jerry A. Viscione. Financial Analysis: Principle and methods. Editorial Limusa. 1984.
