Other information used in financial analysis

Where: FC = Fixed Costs

CM = Contribution Margin = Sales – Variable costs

To use the above formula to find a company's target sales volume, simply add a target profit amount per unit to the fixed-cost component of the formula. This allows you to solve for the target volume based on the assumptions used in the model.

3. There are four main sections of the financial analysis such as financial analysis, investment analysis, analysis of the securities market, forecasting of financial statements.

Financial analysis is the process of evaluating businesses, projects, budgets, and other finance-related transactions to determine their performance and suitability. Typically, financial analysis is used to evaluate economic trends, set financial policy, build long-term plans for business activity, and identify projects or companies for investment. 

Investment analysis is a broad term for many different methods of evaluating investments, industry sectors, and economic trends. It can include charting past returns to predict future performance, selecting the type of investment that best suits an investor's needs, or evaluating individual securities such as stocks and bonds to determine their risks, yield potential, or price movements. The aim of investment analysis is to determine how an investment is likely to perform and how suitable it is for a particular investor.

The security market analysis refers to the analysis of markets and securities traded there in terms of the risk-return, quantities raised or traded, price trends and other indicators of the market referred to above. The market analysis is made in terms of fundamental macro factors in the economy and technical factors like price and volume trends in the market. The basic objective of market analysis is to know the fair valuation of shares for buying and selling. The market comprises hundreds of securities whose prices change from day-to-day and from time to time. The investors should have informa­tion of fair prices for making their decisions of buying and selling. It is, therefore, necessary to make security valuation an important part of market-analysis.

Financial forecasting is the process by which a company thinks about and prepares for the future. Forecasting involves determining the expectations of future results. On the other hand, financial modeling is the act of taking a forecast's assumptions and calculating the numbers using a company's financial statements. Predicting financial statements can be a challenge when choosing the actions of the company's management at every step, which is a natural issue. Financial modeling is the process by which a company builds its financial representation. The model created is used to make business decisions.