Articles

Revenue center

Revenue center is a type of responsibility center, for which incomes (i.e. not costs or investments) are collected and analyzed. Revenue centers are often responsible for generation of revenues and have little responsibility over costs.  Their objective is therefore maximization of revenues. A

Advantages and disadvantages of budgeting

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)

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

Investment center

Investment center is a type of responsibility center, for which information about expenses, incomes and investments (assets) are collected and analyzed. It is therefore the most comprehensive center from all other responsibility centers. Separate financial statements are typically produced for inve

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

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