The financial year is a period of time,for which business entities (enterprises, budget organizations) compile reports on their activities, as well as the period for which the state budget is drawn up and operates.
This concept is used in carrying outfinancial analysis of the company. In its framework, the balance sheet is analyzed - its structure and dynamics, liquidity ratios, calculation of net assets, profitability and asset turnover, profitability of activities based on the profit and loss account. Financial analysis is the study of changes in key indicators of the company's development and status in order to determine its financial stability, solvency, creditworthiness, and prospects. Financial sustainability reflects the ability of the company to optimally use its funds to ensure an uninterrupted cycle of production and sales of products (services), as well as to invest in expanding and developing the business, updating the material and technical base. As a rule, when analyzing the dynamics of the above-mentioned indicators, the last financial year and the previous three are compared.
Who spends, for whom (and for what) need analysiscompany activity? Two categories of users are distinguished by financial reporting and the results of such analysis: internal and external. Internal financial analysis is carried out by employees or the company's management in order to monitor financial and organizational activities, as well as to identify further prospects and reserves of the company's development. The sources of the internal financial analysis are the extended balance sheet, various financial reports (including profit and loss), statements for the past periods, for the current financial year and for the present. The main point of internal financial analysis is the calculation of the efficiency of capital, the interrelation of costs, turnover and profit, borrowing and own funds. In other words, all aspects of the firm's activities are considered. Often, the indicators and conclusions of such analysis are a trade secret.
The objectives of internal financial analysis can be:increase profits, search for reserves to reduce costs and increase revenues, develop a new market, reduce receivables for the next fiscal year and subsequent periods. The results of the internal analysis are used by the owners and top managers of the company.
External financial analysis is carried outinterested third parties and individuals on the basis of open and public financial reporting. It can be creditors, shareholders, suppliers, buyers, business partners, investors. The results of external financial analysis are important for banks, leasing companies when considering the possibility of lending to the company (whether it can be calculated on a loan and interest); for potential shareholders and investors in assessing the feasibility of investment in this company; the state - for taxation; arbitration manager - to identify opportunities to exit from the state of bankruptcy or to prevent insolvency and bankruptcy of the enterprise.
In different countries, the reporting year is setin different ways, often coincides with the calendar year, but there are also historically existing exceptions. For example, the fiscal year in the US is set from October 1 to September 30, in the Russian Federation - from January 1 to December 31.