The P&L, Balance sheet, and Cash flow statements are three interrelated parts. The P&L feeds net income on the liabilities and equity side of the Balance sheet. At the same time, we obtain Cash (an asset) by summing the bottom-line result of the Cash flow statement with previous year...

The cash flow statement shows how a company generated and spent cash throughout a given timeframe. An important truth that is frequently neglected by inexperienced business owners is that profit does not equal cash. Every business owner and manager needs to have a clear idea of the cash flows...

If the P&L statement shows how profitable a company was over a given timeframe, we can say that the Balance sheet is like a momentary picture of the firm’s condition at the time of preparation. The Balance sheet shows what a company owns (assets) and what it owes (liabilities...

The Profit & Loss statement gives an idea about the profitability of a business. We subtract revenues from different types of costs to obtain Net income (the company’s bottom line result). Net income (also referred to as net profit or loss) gives us an idea of the economic value...

Performing time series analysis consists in studying data points that are organized chronologically and equally spaced in time. There are different types of time series models. Many of them use autoregressive models to forecast the future values of the variable under consideration. Some other related topics you might be...

One of the best techniques of preliminary data analysis is correlation analysis. It allows us to uncover possible relationships between different pairs of variables in our dataset. At the same time, we should always bear in mind that correlation does not mean causation. Correlation studies the relationship between two...

Value-based analysis is a strategy that aims to outline the most valuable activities of a firm. To successfully compare multiple scenarios and variables, we need to reach a consensus on the exact measures that will be compared. This analysis can be based on an expert opinion when it is...

Comparative analysis is the comparison of two or more variables. We consider two scenarios – let’s say A and B. And how two variables we’ve selected would impact scenario A and B. The comparison can be internal or external. An internal comparison involves two business units or departments within...

Trend analysis is the practice of uncovering patterns in your data. In most organisations, trend analysis is used to monitor metrics and their development over time. As such, trend analysis relies on effective historical analysis. In simple terms performing trend analysis means using historical data in order to look...