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JOURNAL OF INTERDISCIPLINARY RESEARCH
current performance of the company and to assess its
sustainability.
The most used methods of financial analysis include cross-
sectional methods (technical and fundamental analysis) and
elementary methods (analysis of absolute indicators, analysis of
difference indicators, analysis of ratio indicators and analysis of
summary indicators).
3.1.1 Cross - sectional methods
Technical analysis and fundamental analysis are part of the
cross-sectional methods of financial analysis of a company.
Technical analysis
"Technical analysis uses mathematical, mathematical-statistical
and other algorithmic methods for quantitative processing of
economic data with subsequent qualitative economic assessment
of results. In this sense, financial accounting is a suitable
database, it provides information in quantitative, numerical form,
in a uniform language of business communication," (Bartošová,
2020, p. 37).
Fundamental analysis
"Fundamental analysis is based on a large amount of
information, processes qualitative data, but also uses quantitative
information, from which it draws conclusions without the use of
algorithmic procedures. The analyses are based on extensive
knowledge of the interrelationships between economic and non-
economic phenomena, on the experience of experts, but often
also on the direct participants in economic processes and on their
subjective estimates. The process of fundamental analysis is
specific to each individual company and depends on the
subjective attitude of the analyst. For this reason, too, there is no
single concept or methodology governing the process of its
implementation. Fundamental analysis considers several factors
that illustrate the situation of the company and therefore it is
appropriate to carry it out at the same time as technical analysis,
which does not have such a wide scope, but has standardized
procedures for company evaluation," (Bartošová, 2020, p. 38).
3.1.2 Elementary methods
Elementary methods are considered simpler in terms of
mathematical procedures used (especially arithmetic and
percentage) and in terms of ease of thought, respectively. trying
to describe complex things simply. These include the analysis of
absolute indicators, the analysis of difference indicators, the
analysis of ratio indicators and the analysis of summary
indicators.
Analysis of absolute indicators
Absolute indicators can be analysed using horizontal and vertical
analysis. Horizontal analysis is often referred to as trend
analysis. It is based on comparing the items of individual
statements in several periods. The analysis is more readable if
the development of items is expressed by the difference between
the data of two adjacent years or by the index of year-on-year
changes of these data. "Vertical analysis, also called percentage
analysis, is the expression of individual items in the financial
statements as a percentage of a single selected basis. For the
analysis of the balance sheet, the total value of assets or
liabilities is usually chosen as the basis, and for the analysis of
the profit and loss statement, it is the size of total revenues or
costs," (Knápková, 2010, p. 66).
Analysis of difference indicators
Differential indicators are mainly used to analyse and manage
the financial situation of the company with an orientation
towards its liquidity. The difference indicators include net
working capital (total current assets - total current liabilities), net
cash (ready cash - liabilities payable immediately) and net cash
assets (total current assets - inventories - liabilities payable
immediately).
Analysis of ratio indicators
Ratio indicators are the most popular method of financial
analysis. They provide a quick and inexpensive picture of the
basic characteristics of the analysed company. "Such basic
characteristics include, for example:
turnover (activity indicators),
liquidity (liquidity ratios),
financial structure, indebtedness (indebtedness indicators),
profitability (profitability indicators),
position on the capital market (market value indicators).
Each basic characteristic is expressed in the analysis by several
ratio indicators, which always indicate it from a different point
of view," (Kotuli
č, 2010, p. 58).
Activity indicators show the commitment of capital in various
forms of assets. They make it possible to express, quantify and
analyse how efficiently a company uses its assets. Adequate use
is a condition of a balanced financial situation.
Liquidity indicators provide information on solvency, i.e.
liquidity of the company. In essence, they compare the amount
of what can be paid (indicator numerator) with what needs to be
paid (indicator denominator). The liquidity of a particular asset
expresses the ability of that asset to be converted into cash
quickly and with the lowest possible loss.
Indebtedness indicators are used to monitor the structure of the
company's financial resources. They express the extent of the use
of equity and debt to finance the needs of the company. The
share of own and foreign resources affects the financial stability
of the company. A high share of own resources provides the
company with stability, independence, with their low share the
company is unstable, market fluctuations and credit uncertainty
can have serious consequences.
Profitability indicators are used to assess the company's ability to
generate financial resources from its own operating activities for
operations, to finance investments, to pay out profit shares and to
repay payables. They express the result of the company's efforts,
i.e. the efficiency of the company's work. They show the
combined effect of liquidity, activity and indebtedness on the
company's net profit.
Market value indicators express how the company is evaluated
by investors. The construction of indicators allows the
comparison of their values between individual companies in the
market. The basic market value indicators include net earnings
per share, return on shares from profit and dividend yield on
shares.
Analysis of summary indicators
These include creditworthiness and bankruptcy models, which
represent an aggregate characteristic (synthetic quantity), into
which the financial indicators with the greatest telling power are
summarized, while they are assigned the appropriate weight.
They serve for quick orientation of investors and creditors, as
well as to classify companies according to their quality
(performance and credibility) into pre-specified categories.
"There is no precise boundary between creditworthiness and
bankruptcy models, as they have a lot in common and their result
is a fixed evaluation coefficient. We find the difference only in
the purposes for which they were created and in the input data
that were used," (Sedláček, 2008, p. 109).
Creditworthiness models reflect the level of quality of the
company according to its performance and are oriented to
investors and owners. Bankruptcy models are intended primarily
for creditors who are interested in the company's ability to repay
its obligations.
"Models based on empirical-inductive systems of indicators,
which mostly use the following methods, are increasingly used
in the prediction of financial distress of a company:
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