How to write a financial analysis report

Written by thomas jones Google
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How to write a financial analysis report
Add credibility to your report with expert analysis and third-party quotes. (Stockbyte/Stockbyte/Getty Images)

A financial analysis report gives inside information about a company’s financial health. It is the prime source of company information for external stakeholders, such as a lender or an investor. Raw financial statements contain key numbers and flows but these are not always sufficient for someone to form a solid opinion about the business. A report provides necessary background, contains expert analysis, assessment of risks and opportunities in the industry as well as a summary of the company’s past performance and current situation.

Skill level:

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  1. 1

    State the objective of the report. Include the reason it was written. Ste the boundaries, and specifically list the topics not under consideration.

  2. 2

    Summarise key conclusions briefly. Do not kill the interest in reading the rest of the report.

  3. 3

    Analyse the environment in and around your company. In this section, describe any relevant information related to the company that you feel can assist the reader in making a decision. If the company’s history is one to be proud of, include that as well. Outline the company’s current situation and describe how you see its future. List all the external environmental factors that may influence company’s performance. If there is a new legislation in your industry, say how it is going to affect the business.

  4. 4

    Give information about how recession-resistant the company is, supported by with figures from 2008 to 2010. Describe the labour market in the company's industry. Shed a light on the company's industrial relations record.

  5. 5

    Insert an excerpt with expert analysis of your company. Cover their conclusions on the company's current performance and potential. Make sure that experts are authoritative and unbiased.

  6. 6

    Prove the company is making money by referring to the past and current financial statements. Calculate some key ratios, such as current asset ratio or activity ratios, which can express your success in one simple figure.

  7. 7

    Before making final conclusions, list the assumptions you made. For example, you may have assumed that no major changes in the external environment will happen in the next 5 years. Explain the mathematical formulas used in ratio calculations and financial forecasts.

  8. 8

    Close the report by summarising conclusions reached about the company’s financial health. Remind the reader of the report’s objective.

Tips and warnings

  • A financial analysis report has a subjective element to it because of all the assessments and expert opinions, therefore it is important to write it in good faith. Depending on whom you write the financial statement report for -- creditor, investor or company shareholders -- it can have a slightly different format, although certain topics have to be covered in any case.
  • Financial analysis reports have to be narrative in nature. Do not overcomplicate them with figures and references to too many external sources. The reader can always a look at the original statements.

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