1. Setting the objectives and users of financial analysis - to make it clear what will be its main focus.
2. Selection the appropriate methods and indicators. There is a wide range of indicators and some are used more than others. However, it is certainly not desirable to calculate and analyze all of them. Not only because they are often interrelated, but such analysis would be very confusing. Indicators are usually chosen consistently over longer period of time and the purpose of use. We mark the most important indicators on this website with (!).
3. Selection of appropriate inputs and their possible adjustment, e.g. for extraordinary operations, which will not be repeated in the future.
4. The calculation (including basic logical checks!)
5. Analysis and interpretation - the hardest part. It may include various comparisons of the calculated figure – please see the article about general comparatives used in financial analysis.
6. Ascertainment of interrelationships between indicators.
7. Ascertainment of the causes of the differences - no indicator can be looked at individually without context with other indicators.
8. Breakdown of variances into controllable and uncontrollable (e.g. inflation, new legal standard, fashion).
9. Development of conclusion and recommendations for the future.
10. Summary of all the points mentioned above (e.g. into a report). This may, in addition to standard components, include: