The importance of conducting financial analysis in an enterprise
DOI:
https://doi.org/10.68210/jgeor.a91Keywords:
financial analysis, enterprise management, financial statements, profitability, liquidity, risk managementAbstract
Financial analysis is a central part of effective enterprise management because it helps decision-makers assess profitability, liquidity, solvency, operational efficiency, and financial risk. This article examines the role of financial analysis in evaluating business performance and supporting managerial decisions. It reviews relevant literature on financial statement analysis and corporate finance, then describes a qualitative, literature-based method using horizontal, vertical, ratio, cash-flow, and comparative analysis. The discussion shows that these methods can help management identify cost pressures, monitor short-term obligations, evaluate financing choices, and assess investment proposals. It also explains that accounting profit does not always indicate strong cash availability and that financial ratios must be interpreted in the context of industry conditions, accounting policies, and economic change. The article concludes that regular financial analysis, supported by reliable records and appropriate interpretation, can strengthen planning, risk management, and the sustainable use of resources. Because no original company data were collected, the findings represent a conceptual synthesis rather than empirical results from a specific enterprise.
Downloads
References
Atrill, P., & McLaney, E. (2019). Accounting and finance for non-specialists (11th ed.). Pearson.
Brealey, R. A., Myers, S. C., & Allen, F. (2020). Principles of corporate finance (13th ed.). McGraw Hill.
Fraser, L. M., & Ormiston, A. (2016). Understanding financial statements (11th ed.). Pearson.
Gibson, C. H. (2013). Financial reporting and analysis: Using financial accounting information (13th ed.). South-Western Cengage Learning.
Higgins, R. C. (2012). Analysis for financial management (10th ed.). McGraw-Hill/Irwin.
International Accounting Standards Board. (2018). Conceptual framework for financial reporting. IFRS Foundation.
Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2020). Intermediate accounting (17th ed.). Wiley.
Palepu, K. G., Healy, P. M., & Peek, E. (2020). Business analysis and valuation: IFRS edition (5th ed.). Cengage Learning.
Penman, S. H. (2013). Financial statement analysis and security valuation (5th ed.). McGraw-Hill Education.
Ross, S. A., Westerfield, R. W., Jaffe, J., & Jordan, B. D. (2022). Corporate finance (13th ed.). McGraw Hill.
Subramanyam, K. R. (2014). Financial statement analysis (11th ed.). McGraw-Hill Education.
White, G. I., Sondhi, A. C., & Fried, D. (2003). The analysis and use of financial statements (3rd ed.). Wiley.
Downloads
Published
Issue
Section
Categories
License
Copyright (c) 2026 Journal of Green Economy and Optimization Research
This work is licensed under a Creative Commons Attribution 4.0 International License.
Copyright © The Author(s).
Authors retain copyright in their work and grant the Journal of Green Economy and Optimization Research (JGEOR) the right of first publication.
Articles published in JGEOR are distributed under the terms of the Creative Commons Attribution 4.0 International License (CC BY 4.0). This license permits use, sharing, adaptation, distribution, and reproduction in any medium or format, provided that appropriate credit is given to the original author(s) and the source, a link to the Creative Commons licence is provided, and any changes made are indicated.
Authors are responsible for obtaining permission to reproduce any third-party material that is not covered by the article's Creative Commons licence.
