BA Technique #20: Financial Analysis

Assessing proposed solutions' economic viability, costs, and benefits

Erivan de Sena Ramos

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Photo by DCP on Unsplash

Greetings, my fellow BAs! It’s time to resume our fascinating exploration of the 50 essential Business Analysis techniques from The BABOK Guide v3. With Financial Analysis, we’ll unlock the secrets of financial statements, evaluate performance metrics, and gain a comprehensive understanding of an organization’s financial health. Brace yourselves for a deep dive into the world of numbers and financial insights. Let’s kick off our exploration of it!

What is this technique about?

Financial Analysis traces back to Benjamin Graham’s book “Security Analysis”, which laid the foundation for Value Investment. It involves analyzing a business’s financial statements, market position, and economic factors to forecast future prices. The goal is to determine a company’s value, assess management, and make informed investment decisions.

In Business Analysis, using the Financial Analysis technique involves examining data, statements, and indicators to gain insights into an organisation's position and performance. Business analysts can make informed recommendations and support effective decision-making by analysing financial information.

How to apply this technique?

To effectively apply Financial Analysis, consider the following suggested steps:

  1. Identify Financial Objectives — Clearly define the financial objectives and areas of focus for the analysis. Determine the specific financial aspects to be evaluated, such as revenue, expenses, profitability, or cash flow.
  2. Gather Financial Data — Collect financial data from various sources, including financial statements, accounting records, and reports. Ensure the data is accurate, complete, and reliable.
  3. Analyse Financial Statements — Review and analyse critical financial statements, such as the balance sheet, income statement, and cash flow statement. Identify trends, patterns, and ratios that provide insights into the financial performance and health of the organisation.
  4. Assess Financial Ratios — Calculate and evaluate financial ratios, such as liquidity…

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Erivan de Sena Ramos

Business Analysis & Requirements Engineering enthusiast. Information Systems & Software Engineering specialist. MBA in PM & HR. CBAP, PMP, CSM, ITIL & COBIT