An analysis of the strengths and weaknesses of your business is essential to attract new investment and to help you keep track of your business’s success in achieving long-term and short-term goals. A financial report analysis highlights these strengths and weaknesses, as it provides a detailed appraisal of your company’s financial and operational health.

Overview Section

Set the context for the financial report analysis in the overview section. In this section, describe your business, its industry and your underlying motivation or ambitions. Include a broader analysis that identifies and explains the affect of key elements of the environment in which your business operates. To achieve this, highlight your company’s position within the industry by analyzing the threat of new entrants in the market, as well as that of substitute products. Also, analyze the intensity of the rivalry among competitors in the industry and the extent of the influence that suppliers and buyers have on your company.

Financial Analysis Details

An analysis of the financial aspect of a company revolves around its liquidity, profitability and borrowing. The financial analysis section of the report caters to this need. Quick and current ratio demonstrate your ability to pay business obligations such as credit from suppliers. Various other calculations -- including revenue growth rate, expenses to sales ratio or gross profits to sales ratio -- accentuate your company’s profitability from different angles. Analyzing your company’s debts is essential. By calculating the interest coverage ratio, you can ascertain your company’s ability to pay for interest expense from its profits after paying all other expenses.

Operation Analysis Details

The operations analysis section focuses on the efficiency of your company’s assets. For this analysis, use ratios that assess inventory, receivables or accounts payable turnover. Inventory turnover shows how fast your stock converts to sales. The receivables turnover ratio shows your company’s efficiency in collecting cash from credit sales, and the accounts payable turnover ratio shows your company’s efficiency in paying creditors. Other ratios you can use for an operations analysis include asset turnover ratio, sales per employee and changes in various overheads.

Interpreting the Analysis

From the overview to the financial and operational analysis, the entire document must have links and relationships that are explainable back and forth among sections. The analysis gives a complete picture of the current standing of your business. Moreover, the overview and the ratio analysis sections must align logically so the complete analysis makes sense. If the level of competition is high in an industry, as examined in the overview, the profitability ratios will present tighter margins. Therefore, you might need to focus on maintaining maximum efficiency in your operations. In such conditions, you might try to beat the competition by gaining a larger market share through further advertisements. You also might try to sustain or grow profits by curtailing unnecessary overheads. Therefore, your analysis must draw interpretations with clear links and explanations.