Industry Analysis Order 844692
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Industry Analysis Order 844692
Financial Statement Analysis
It is a legal obligation that every firm must prepare financial statements at the end of each fiscal year for taxation by the government (Robinson, 2020). The financial statements of any firm reflect on its financial position and performance as at the date of the financial statements’ presentation. These statements also give shareholders and other interested parties a breakdown of how the management is using its entrusted resources to ensure the firm’s stewardship. Some of the financial statements prepared by privately-owned and publicly-owned enterprises include the balance sheet, statement of comprehensive income, cash flow statements, and changes in owner’s equity. The balance sheet shows the tradeoff between the firm’s assets adjusted against the firm’s liability and equity at a given point in time. On the other hand, the income statement reflects on the ongoing business operations and how the business expenses are being adjusted against the profits arising from the entity.
A closer focus and comparison of various balance sheet statements of an entity is of great importance to other entities competing in the same industrial range. Balance sheet information can reveal how the firm is converting its useful resources for profit gain. The statements of financial position can also reveal the various sources of business funding by considering the kind of liabilities the business owes to other firms. For instance, the business may have acquired loans from SACCOs, banks, or other financial institutions that are offering loans at favorable conditions. Similarly, focusing on the equity of the firm, someone can tell whether the business is liquid or not. Therefore, comparing such standards with my technology business firm, I can decide whether the business is favorable to venture in the same industry. In addition, a trend analysis of various balance sheets from different ventures in the same industry may also depict which firm is performing better in the industry in case my technology business anticipates a merger or an acquisition.
On the other hand, income statements generated at each year-end are equally important as balance sheets in carrying out trends and cross-sectional analyses of ventures. A closer focus of the expenses in the income statements may give my new technology business a glimpse of what is expected once the business kick starts its operations. This will allow room for proper budgeting and minimize the budgets set aside for contingencies. Other aspects, such as provisions for bad and doubtful debts, will enlighten my technology firm to minimize risks of large debts accruing from untrusted consumers. Provisions for bad debts will allow my new business to set some amounts aside for catering for such expenses rather than assuming and accounting them all as income in the trade receivables account. Other adjustments, such as the carriage inwards, will enable the new technology business to learn how to incorporate transit cost on stocks purchased as part of the stock.
Moreover, depreciation of long-lived assets such as moto vehicles and tear and wear should be part of the business expense at any given point the business is accounting for such items. The newly anticipated technology venture can learn the best way of valuing the depreciation expense in its books of accounts. Besides, other aspects such as stock valuation methods are worth examining since the stock is the key component from which profits arise. Therefore, proper maintenance and valuation are necessary to account for the anticipated cash inflow. Stock valuation methods such as the First In First Out (FIFO), Last In First Out (LIFO), and the Average Weighted Method (WAM) are a master key in the success of the new business. Other important components are the treatment of defective goods and other expenses such as interests accruing from mortgages and debentures acquired to finance the business operations.
Industry Analysis
Industrial trend analysis encompasses factors like competitive forces, PEST, and SWOT analysis. While undertaking plans to venture into a new entity, it is essential to carry out trends and cross-sectional analyses to have a better understanding of the new fields. Industry analysis is used by many businesses in understanding the competitive industrial dynamics (Aithal, 2017). Consulting experts or carrying out market research can reveal the much-needed information in ensuring that the new entrant turns out a resounding success. Therefore, industry analysis enhances the comparability of a new business in relation to other partakers of the same business. Industry analysis is carried out most importantly for various reasons, including competition analysis, demand-supply analytics, the future of the industry, credit services availability, and external factor influence. On broader prospects, these factors can be categorized into three main aspects.
The performance of service industries is also affected by other factors beyond their control. New and existing technology firms cannot assume these factors since they have a big impact on their success. The PEST model puts forth political, economic, social, and technological factors as key determinants in the broad factor analysis. Political Factors that have a bearing on businesses include all government interventions, taxes, subsidies, labor laws, tariffs, regulations, and political stability. Regarding the economic factors, forces such as inflation, capital markets, interest rates, and exchange rates are experienced. Other social factors, such as demographics, social movements, and health, will also have an impact on my technology venture. Not forgetting the technological aspects, advancements in the current mode of operations should be put into consideration.
Technology is fast advancing since the turn of the millennium, and most of the people are turning to technology to get technological apprehension of their businesses. Most of the people worldwide are now trying to use technology to avert fraud at their workplace and also ensure that they are informed in affront of the events that occur in the business. In order to understand the working of the technology, people have to acquire equipment and services that may be able to provide them with such knowledge. Thus, the issue led to the interest of opening the cybersecurity business so that people are offered technological solutions and tools. The business will primarily focus on the SMEs, medium-size companies and organizations around the country.
The cybersecurity industry has been one of the most admired businesses around the globe. Therefore, most people are now investing in it for its good profits and the trend the business has been having for the last few view years. The market growth of the industry has been on a growth curve ever since the discovery of the computer. The increase has been due to the fact of people ensuring they use eCommerce platforms to conduct business. In Europe alone, the industry has seen a surge in the growth to a worth of $36.02 billion. Most of the services that were offered are internet security and also network solution. For growth purposes, every business that is looking to grow has to ensure that it invests in technology. The annual growth of the technology industry worldwide is 13.3%, with a forecast from 2019 to 2024 (Fortune Business Insights, 2019). As per the industry projections, the expected earnings per year are $142.9bilion and $267.2 billion, respectively.
Even after the emergence of the covid-19 pandemic, the technology industry has seen an increase in its growth of use in most businesses globally. It is due to the fact that most people chose to work at home through the use of technology. As per the analysis during the pandemic, a growth of 7-8% was expected to be realized by the end of the year 2020. The slow growth will be due to the closure of companies during the period.
References
Aithal, P. S. (2017). Industry Analysis–The First Step in Business Management Scholarly Research. International Journal of Case Studies in Business, IT, and Education (IGCSE), 1(1), 1-13.
Fortune Business Insights (2019) Cybersecurity industry analysis. Retrieved from https://www.fortunebusinessinsights.com/industry-reports/cyber-security-market-101165
Robinson, T. R. (2020). International financial statement analysis. John Wiley & Sons.