October 15th, 2012
Business Analysis Part I
By investing every investor wants to see how his or her money grows. Unfortunately, sometimes instead of making money, an investor can lose his or her assets. So they have to think twice before making decision to invest. He or she can make an investment by buying bonds, stocks of particular company. Some people prefer to invest by opening their own business. Before making any investment the investor must take time and with the help of business analyses, have clear picture of the company or organization that he or she trying to invest money. Nobody wants to take a risk of losing his or her assets. So you may invest only after analyzing the business and seeing a huge chance of success, acquiring expectation of profit. As investor, we must see their financial statements and prior years’ filings, buy all of these documents will not tell us anything, if we do not know what are their values and how the business or organization is making money. Business analysis will give all the answers to our questions before making decision to invest.
By the help of SWOT analysis, we can evaluate the Strengths, Weaknesses or Limitations, Opportunities and Threats. The SWOT analysis will help every investor to identify the positive and negative structures of every business, it may help you to develop and confirm your goals.
Strength will help us to understand the characteristic of the business or organization, to see the advantage of it over other companies. This is very important tool, as today we have many similar businesses, and there is a big competition between them. Strength is internal origin, and you can control it. You can make your product or service better and take the advantage, be more wanted.
Here we can see the weaknesses of a company. Weaknesses are also in internal origin, and you can control it. This will help us to understand what is the disadvantage of the company’s product or service and how we can improve them. Weaknesses may appeared because of limited sources, lack of skills or technology, expertise, and even because of choosing wrong location of operation. These are factors that we can control and improve.
These factors will discover what opportunities exist in market or in the environment from which you hope to benefit. Opportunities are external to your business. Recognizing the opportunities of your business may be the result of market growth, resolution of problems that exist in certain situation, lifestyle change, and the ability to offer greater products or services.
Threats will help to recognize the potential threats to your business. Threats are external, and you may not have control over them, buy you may benefit by having plans to address them if they should occur. Threats may include increasing prices by suppliers, governmental regulations, economic changes, and a shift of customers which may reduce your sales.
Business analysis helps us to determine the business requirements, and develop them, identify, analyze, and communicate with stakeholders, understand techniques, and impact on testing and product quality.
Next important step to take before make investment will be to read and understand the company’s financial statements. They need a report that summarizes its assets and liabilities. They need to know the profit performances of the business. They need a report that shows sales revenue and expenses and the resulting profit or loss for the certain period. Investors also need to know the cash flows of the business. To have answers for all these questions they need three accounting reports; balance sheet, income statement also known as profit and loss statement, and statement of cash flows. First of all as an investor we would like to know the profit of the company, so we may start with income statement. The top line of the statement