Three steps in financial analysis and management reporting - Essay Example

In this idea, it is showcased how important it is to determine the facts about the organization before anything else has to be taken into account in financial analysis. This is very important because it is the organization itself that has to be the center point of financial analysis. For instance, an organization is composed of human resource. In a specific study, it is shown that the success of introducing new system into the company for the purpose of improving financial performance is determined by understanding the needs of the personnel and their capacity to adapt the new introduced system (Randolph and Ogawa, 2007).

The effectiveness of an organization can be attributed to the performance of its personnel. In other words, part of the facts that should be gathered in understanding an organization is the capacity and competency of the human resource. This is evident on the task of financial analyst in which he or she must have a detailed understanding about the management and the company in particular (Hagberg, 2003). In line with this, it is important that financial analysts must be able to determine both financial and non-financial performance information of an organization as basic foundation of the analysis (Coram, Mock and Monroe, 2011).

In this regard, there is a good opportunity to gather accurate information that will help determine the right approach in the entire process of financial analysis. Compare the facts in the organization over time to facts in similar organizations One of the most important benefits in trying to compare facts in the organization over time to facts in similar organizations is to understand how well it is performing and to know other financial issues in it such as the general financial strength (Cleary, 2006).

In a study conducted by Cleary, the investigation of facts and comparing them among different organizations prove to be an effective way to understand financial strengths and performance of an organization. Thus, it is evident that an organization that tries to compare its financial information from the other is a significant way to check performance and eventually will pave way to create the right evaluative process. In creating a standard in financial activities, there is an assurance of awareness and the right implementation process towards an organization’s achievement of financial strength (Iatridis, 2010).

Balanced scorecard is known to be one of the best adopted strategies for performance measurement and evaluation of the company and its financial performance. In line with this, this measurement deals with understanding the facts within an organization and especially in similar organization for comparison. For instance, one of the most essential components of balanced scorecard is customer. Customer-oriented organizations are eventually trying to provide the best customer value especially in customer-oriented organizations (Flint, Blocker and Boutin, 2011).

These companies in order to achieve their best performance through their customers try to compare the facts they have with them and that of the other organizations in order to substantially create customer value. It is therefore clear in this point that it makes sense to result to comparison of performance and information in order to achieve organizational objectives. Use perspective and judgment to make