Financial Analysis

Financial modeling is the act of assembling a spreadsheet of a company's expenses and earnings in order to more accurately calculate the result of future actions or events. Financial analysts can use modeling to predict how external and/or internal factors will affect a company’s stock performance. Company executives, meanwhile, may use financial modeling to estimate how much a new project may cost and/or earn.

Statistics is a mathematical discipline concerned with collecting, analyzing, and interpreting data. The main areas of statistics are “descriptive statistics,” referring to the collection of sample and population data, and “inferential statistics,” referring to the use of descriptive statistics to test hypotheses and infer meaning from data. Financial analysts and investors use statistics when drawing conclusions from price and volume data about companies, industries, and markets.

Data analytics is a systematic analysis of statistical information. This type of analysis can be used to uncover trends and metrics that wouldn’t be readily apparent due to the amount of raw data. Data analytics is particularly useful for companies looking for opportunities to increase the overall efficiency of their businesses or systems.

A sample is a small amount of something that serves as a representation of a larger group. In statistics, samples are used when collecting data from an entire population is impractical or impossible due to its size. In order to make accurate inferences and/or predictions, samples must resemble a broader population and avoid any biases that could skew results.

Percentage change refers to the percentage difference between a starting value and a new value, which can be applied to any quantity that changes over time. Percentage change is often used in finance to track the growth of both individual stocks and market indexes. Companies will also typically include percentage changes in their quarterly reports to highlight trends in their revenues/profits.

EBITA, or earnings before interest, taxes, and amortization, is a measure of the profitability of a company’s operating business. EBITA doesn’t account for taxes owed, the interest on company debt, and the effects of amortization, as these can potentially distort the perception of a company's performance. This measure’s main advantage over others is that it more clearly indicates the amount of cash flow a business has to either reinvest or pay dividends.

Gap analysis is the act of comparing a company’s current state or performance with a target state or performance. This process provides a clear indication of whether a business is using its resources, capital, and/or technology effectively, which makes it easier for upper management to identify areas that need to be improved. Gap analysis is useful for companies of all sizes and can be applied to a variety of different areas, including a business’ sales and/or overall financial performance.