Financial analysis is a process that drills down into the financial information of a business and makes sense of the data it presents. It allows businesses to make informed, long term decisions by lowering their risk and maximizing profit margins through targeted financial data analytics.
Financial analytics is a set of financial tools that allows deeper insight into the financial standing of a business for that moment or over a period of time. It provides insight into financial performance indicators such as profitability, solvency and liquidity. This information can help businesses make better decisions by:
Analyzing cash position: Financial analytics is important to determine the cash position of a business. This allows the business to decide whether to submit finance applications to buffer the cash position, such as cash injections. It can also reveal cash surpluses that may afford business investment opportunities.
While almost any business can benefit from the financial data provided during financial analysis, certain businesses can benefit a little more. These are businesses that want to:
Improve risk management: Mitigating risk is an essential component of business growth and may encourage future business investment. It highlights where the business may be overexposed in terms of debt or if it's scaling too fast.