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traditional methods. They do not use modern methods of
evaluation at all, or minimally. But when assessing the financial
performance of a given company, the environment in which it is
located and in which it operates must not be forgotten.
Therefore, it is necessary to analyse the internal and external
environment of the company. Only in this way will the company
obtain, for the purposes of evaluating its financial performance,
the necessary information about its internal environment,
external environment, the current state of its financial
performance and its prediction for the future. The proposed
process for evaluating the financial performance of a company
consists of the following steps.
The first step is to collect the data itself. It covers how
information is used in the company, what information sources
are in it, then the emergence of new information and knowledge,
their flows within the company and into its external
environment. The proposed documents for the evaluation of the
financial performance of the company include financial
statements of the company, annual reports, various statistical
data and internal material of the company.
The second step is the analysis of the internal environment of the
company, which examines and evaluates its internal
environment. The analysis of the internal environment of the
company in a clear form shows its strengths and weaknesses. In
this sense, they can represent strengths of skills, abilities and
potential that will allow a company to gain a market advantage
in the form of better products, better services or optimization of
business processes. Therefore, it is necessary to analyse the
organizational structure of the company, its production program
and human and information resources.
The third step of the proposed process is the analysis of the
external environment of the company, which also affects its
performance. The external environment in which the company is
located consists of two spheres, namely the macro-environment
and the sectoral environment. Therefore, the company should
use competition analysis, PEST analysis, Porter's model and
SWOT analysis. An analysis of the competition is important for
the company, as it can use its own criteria in which it can be
compared with the competition. In the PEST analysis, the
company can monitor the external influences that affect it. For a
company, this means summarizing an overview of political,
legislative, economic, technical, technological and social
impacts. Porter's model represents market research for the
company, which is necessary and provides informative value
from five important areas. It is appropriate if the company
displays the results from the Porter model in a transparent
model, where the forces affecting the external environment will
be shown. The last analysis of this step is a SWOT analysis, by
which the company can reveal the strengths and weaknesses
within the company, but also the threats and opportunities that
come to it from the external environment.
The fourth step of the proposed process for evaluating the
financial performance of a company is its financial analysis, as
the basis of traditional evaluation methods. It is this analysis that
will serve the company as a comprehensive basis for a more
detailed assessment of the current financial situation and
performance. Financial analysis also serves to determine the
health of the company. With its help, the company is able to
evaluate the past, present and precondition for the future. The
aim of this analysis is to identify weaknesses that could lead to
problems in the future and to identify strengths on which the
company can build in the future.
The last step is to evaluate the financial performance of the
company using some modern methods, which are listed in the
previous chapter.
It is important that, after each analysis performed, conclusions
are drawn with specific findings and measures in place so that
negative impacts can be minimized. Only by honest analysis can
a company gain a competitive advantage, reveal its shortcomings
and increase its financial performance.
5 Conclusion
As already mentioned, financial performance has the most
important position in the performance of a company. This is
because it is a subjective measure of how well a company can
use assets from its core business and generate income. This term
is also used as a general measure of the overall financial health
of a company for a given period.
It is increasingly difficult for companies to secure long-term
success on the market. Only a company that is able to face
changes in the business environment will gain a stable position
on the market. Therefore, the evaluation of a company's financial
performance becomes a key and irreplaceable tool for the
financial management of any company in order to constantly
look for ways to improve it in order to maintain long-term
competitiveness.
"When evaluating the company's performance, two basic
principles of finance must be respected:
The euro gained today has a higher value than the euro we
get tomorrow.
The safe euro has a higher value than the risky euro,"
(Kotulič, 2010, p. 131).
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Primary Paper Section: A
Secondary Paper Section: AH
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