Economic and Financial Analysis

Drd. Dragos Gabriel ION

• 60% - Curs
• 30% - Seminar
• 60% - test
• 30% - activitate
• 10% - prezenta
 What is Financial Analysis?
• Financial analysis is the process of analysing a company’s financial
statements for:
• decision-making purposes
• to understand the overall health of an organization.
• To provide useful information for:
• investors,
• shareholders,
• managers,
• other interested parties.
 Financial analysis
• Financial analysis is an evaluative method of
determining the company’s:

• Past performance
• Current performance
• Projected (Future) performance
 Methods
• Several techniques are commonly used as part of
financial statement analysis including:

• horizontal analysis,
• vertical analysis,
• ratio analysis.
 Horizontal analysis
• (Base-Year Analysis) compares two or more years of financial
data in both m.u.(monetary units) and percentage form
2017 base-year 2018
REVENUE 100K 100% 120K 120%
COST OF GOODS SOLD 70K 100% 90K 129%
GROSS PROFIT 30K 100% 30K 100%
OPERATING EXPENSES 10K 100% 12K 120%
INCOME TAXES PAID 10K 100% 12K 120%
NET INCOME 10K 100% 6K 60%
 Vertical analysis
• Vertical analysis, in which each category of accounts on the
balance sheet is shown as a percentage of the total account
2017 2018
REVENUE 100K 100% 120K 100%
COST OF GOODS SOLD 70K 70% 90K 75%
GROSS PROFIT 30K 30% 30K 25%
OPERATING EXPENSES 10K 10% 12K 10%
INCOME TAX PAID 10K 10% 12K 10%
NET INCOME 10K 10% 6K 5%
 Ratio analysis (Performance Indicators)
• Which calculates statistical relationships between data.
• Measuring and understanding the performance of:

• Financial performance,
• Customers,
• Internal Processes,
• Employees.
 Financial performance
• Revenue growth rate
• Net profit
• Net profit margin
• Gross profit margin
• Operating profit margin
 Customers
• Net promoter Score (NPS)
• Customer profitability score
• Customer retention rate
• Conversion rate
• Relative market share
 Internal Processes
• Capacity utilization rate
• Project schedule variance
• Project cost variance
• Earned value metric
• Order fulfillment cycle time
 Employees
• Human capital value added
• Staff advocacy score
• Efficiency compared to competitors
 Homework

• Chose another indicator from each section

Bibliography

• Analiza Economico Financiara a Firmei

• https://www.investopedia.com/articles/04/022504.asp
• https://www.slideshare.net/BernardMarr/25-ntk-key-performance-
indicators