Financial Analysis Tools
Defining Financial Analysis Tools
Financial analysis tools are one of the most efficient ways that can be used for ensuring good profit from your investments. These financial analysis tools are highly helpful in evaluating the market and investing in a way so as to maximize the profit from the investments made. These financial analysis tools are useful for deciphering both internal and external information related to a specific business organization.
Applications of Financial Analysis Tools
Mainly, the financial analysis tools can be used for SWOT analysis. The term SWOT is short for:
S – Strength
W – Weaknesses
O – Opportunities
T – Threats
The economic conditions in the present day market are analyzed by management professionals with assistance from SWOT analysis performed by the various financial analysis tools. Each section of the evaluation process contains specific information which is helpful in gauging the general performance of a company. Moreover, financial analysis tools are really important for any investor for the company’s performance shows direct impact on the price of a company’s stock.
Types of Financial Analysis Tools
There are different types of financial analysis tools available in the financial field. These tools are designed especially for carrying out specific functions. Among these different types of financial analysis tools, the Balanced Scorecard is one tool which can be of good assistance to gauge the financial position of a company (can be easily performed using ReadyRatios software). This financial analysis tool is helpful in subjective as well as objective measurement of special processes. Moreover, this financial tool is also helpful in evaluation of a company’s overall return, the operating income, and the capital financing processes.
Another important financial analysis tool is benchmarking which is used for assessing the intrinsic strengths and weaknesses of a business organization. Besides, this also sways the stock price of the company. Also, there are some professional agencies which use this type of financial analysis tools to generate advices for their clients.In addition to the aforementioned financial analysis tools, other important financial analysis tools include ratio analysis, trend analysis, comparative financial statement analysis or horizontal analysis, and common size statement analysis or vertical analysis.