Customized Financial Analysis
The Cecere Group’s Outsource CFO services provide the company’s management team with customized financial analysis that allows them to gain insight into the company’s financial results and help them in the development of long term and short-term business plans. There are many different types of analysis that can be applied to a company’s specific needs depending on the nature of its operations. We will customize key financial analysis for your organization that is designed to highlight and bring focus to those critical measurements of financial health needed to run your business.
Financial analysis translates financial information from the company’s books and records into meaningful data that management uses to help run its business. Financial analysis allows comparisons to made on an equal footing. Financial analysis can take a variety of forms based on the type of business the company engages in as well as the type of revenue or expense that is being analyzed.
Ratio Analysis measures the relationship between standing financial data elements and is particularly meaningful when focused on working capital measurements for companies that carry inventory or require cash to be tied up on the balance sheet prior to realizing sales. Ratio analysis results can be easily followed over time in the form of a trend analysis.
Profit Margin Analysis is a very powerful tool for any company and is often measured over a period of time in order to evaluate the changes in terms of sales, costs and profit. Profit margin can also measure the extent to which a company has benefited from operational scale as reflected in the difference between the grown in sales and the growth in costs. This analysis can also be performed by product and down to the client level where data exists for this analysis. Profit margin can also be measured at different cost levels (direct, indirect, fully allocated) to yield more granular levels of analysis.
Cash Flow Analysis measures the lifeblood of a company. A thorough analysis of cash flow will identify sources and uses of cash from operations, investing, and financing. Cashflows from operations are generally derived from changes in current assets and current liabilities, while sources/uses from investing arise from long term asset sales and purchases, and sources/uses from financing are generated from changes in long term liabilities and equity.
Additionally, other analysis can be prepared from non-financial data such as employee headcount, square footage, and units of production. These productivity, efficiency, and utilization measurements highlight areas of opportunity or risk that are outside the scope of traditional financial data.
Key Points:
- Financial Ratios viewed over time in a trend analysis can reveal patterns and relationships to changes in business operations.
- Margin Analysis measured at the direct cost level will yield a contribution margin that identifies the amount to be used to cover fixed costs and ultimately provide net earnings.
- Cash Flow Analysis differentiates results from recurring operations vs one time financing and investment activities to indicate the sustainability and strength of cash flow.
Does AI have a role in Financial Analysis?
It’s likely that Artificial Intelligence (AI) will develop into an important tool for financial analysis for some companies, but its use may not be as widespread as you may think. Certain industries such as Insurance or Asset Management that have formulaic revenue calculations may be more compatible with AI than those with customized and individualized revenue calculations. In case where AI is used, the data and analysis will be repeatable and scalable.