3. Holistic model for financial analysis

Chapter 3


by: josavere


The strategic planning which is prepared with interdisciplinary groups and must be quantified, begins with a key question: where are we, and we continued with two more questions: where do we go? How did we do? Determine where we require careful evaluation based on quantitative indicators that are representative and sufficiently robust that yield a clear picture of the trend and to estimate the potential future value as a basis for defining the variables involved in the strategic plan, which should incorporate CSR as part of the strategy.

The strongest criticism of the financial data makes it corresponds to what happened and the decisions relating to the future, a matter that can improve using the statistics, looking for trends via simple linear regression, in the event that the behavior of the data allows. If the linear correlation coefficient of the variable under study is greater than 0.9, states that positive correlation exists and if everything continues as it is, the predictable future value, which becomes a basis for analyzing how to improve it through a proper strategy and good execution. For this purpose, we deal with the most representative items of the balance sheet, the income statement, and equity.

The model is constructed to " TALK " using vertical analysis, which allows us to see the relative importance of all items of assets, liabilities, and equity (financial structure) and blue ink marking the areas of greater relative importance for the particular company because they are the priority that should be addressed to improve performance. Based on the horizontal analysis, we mark with red the areas that have increased less than proportionally, which have become brakes.

Subsequently, we developed a matrix with the financial indicators of liquidity, activity, debt coverage, profitability, calculated based on the above figure and especially, the EVAC and (corrected value generation and projected) which includes investments in CSR ( corporate social responsibility).

We conclude with a cash flow projected to see availability after attending the priority commitments to keep the company as generating unit value, namely:
1) Fiscal, where all taxes both national, municipal, departmental cluster.
2) Labor, have priority legislation. Includes everything that has to do with legal and contractual aspects.
3) Operation, where all expenses are necessary to keep the business going.
4) Suppliers, partners in practice members of the value chain.
5) Financial institutions with which relations support must be in strict compliance with the obligations.
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