# Articles , Page 10

Articles

Benefits of planning/budgeting increases the probability that the company goals and objectives will be achieved helps in defining strengths and weaknesses on which the entity can concentrate problems can be anticipated and avoided by possible remedial action (doing so after the problem crystali

### Vertical analysis

Vertical analysis is the method of financial analysis, which is used to calculate the ratio of certain item on a summary item, for example % of inventories on current or total assets.

### Methods of financial analysis according to the calculation

Analysis of absolute indicators Analysis of absolute indicators is used to assess the absolute level of various items, e.g. the amount of assets, equity and debt capital, profit, revenue, number of employees, etc. It is used primarily to compare the size of the monitored companies with other compan

### Profitability indicators

Profitability is defined as the ability to achieve profit by using various resources. Profitability indicators form one group of financial analysis, which are used to evaluate profitability and efficiency of the company management, i.e. the company's ability to produce maximum output (i.e. marg

Economic Value Added (EVA) evaluates the value (profit) generated by the company during the year in excess of the cost of capital.   Calculation formula NOPAT - (invested capital * WACC)   Explanation of terms: •  NOPAT →Net Operating Profit After Tax (Operating profit

### Return on equity (ROE)

Return on equity (ROE) is one of profitability indicators, which shows how effectively the entity manages resources invested by the shareholders/partners.   Calculation formula    * can be in the form of average of the beginning and end of the period The numerator is most

### Common problems with financial analysis

Problems with inputs that will influence also the quality of the output from the financial analysis: financial statements are prepared with a certain time lag (usually up to 6 months), the current situation can already be different financial statements include the results of ad-hoc transactions

### Horizontal analysis

Horizontal analysis is the method of financial analysis, which shows the changes (ratio or difference) of the same item over time (e.g. a comparison of total assets at the end of the reporting period compared to the end of the previous year).   It is possible to compare to: the previous pe

### Basic groups of financial analysis indicators

profitability indicators liquidity indicators activity indicators indicators of financial structure and indebtedness market value or capital market indicators group of indicators for broader company analysis

### Profitability

Profitability is defined as the ability to achieve profit by using various resources. Profitability indicators are as follows.

### Return on capital employed (ROCE)

Return on capital employed (ROCE) is one of profitability indicators and it indicates how efficiently the company manages its long-term resources, i.e. how much profit will be generated by the unit of the long-term investment. As the result, ROCE provides better information than ROE, because ROE ha

### Return on assets (ROA)

Return on assets (ROA) is one of profitability indicators reveals how much profit will be generated by unit of assets. It expresses how effectively the company manages its assets.   Calculation formula     * often average from the beginning and ending balance The numerator is

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