Financial statements and reports offer an excellent opportunity to evaluate the performance of a business by comparing to industry standards, competitors or even historical results within the business itself. Financial analytics is the science of transforming financial data into meaningful insights to enable management to make informed strategic decisions.
It should be noted that although financial analysis can offer insight into potential strengths and weaknesses, they do not represent the “end all, be all” of the business’ performance. There are many additional factors which are not captured in the financial statements which must be considered with any financial statement analysis. A deep understanding of the industry, processes and operating environment are crucial and need to be harmonized into any financial analysis.
If you can incorporate financial analysis with other business evaluation techniques, they can offer invaluable insights into the business’ risks and opportunities.