Theory of economic analysis Teacher: Kotlik Andrey Valeriyevich

Theory of economic analysis Teacher: Kotlik Andrey Valeriyevich Management and business department

The essence and the role of economic analysis The essence of economic analysis Classification of economic analysis Economic analysis of enterprise’s activity and its economic role

The essence of economic analysis Analysis comes from the Greek word "analyzis", which means "divide", "dismember“ Analysis in the narrow sence is a fragmentation of an object to its constituent parts (elements) to study them as parts of a whole.

The essence of economic analysis Subdivision (analysis) provides a “glimpse” inside the investigated object, phenomenon, process, to understand its inner essence, the roles of each element in the investigated object or phenomenon.

The essence of economic analysis Analysis in a broad sence is a way of perception of objects and phenomens of the environment, based on the dividing of the whole into parts and studying them in a variety of relationships and dependencies Economic analysis - a scientific way of studying the essence of economic phenomena and processes, based on the dividing of its constituent parts and studying them in a variety of relationships and dependencies

Classification of economic analysis According to the scope of economic object: macroeconomic analysis - studies economic phenomena and processes at global and national economy and its individual sectors, microeconomic analysis - studies these processes and phenomena at the level of individual economic entities

Classification of economic analysis 2. According to the sector: Analysis of industry, Analysis of agriculture, Analysis of construction, Analysis of transport, Analysis of trade etc. Intersectoral analysis

Classification of economic analysis 3. According to the time characteristic: Preview (forecast) analysis is conducted before analyzed business operations. It is necessary to ground management decisions and targets, to predict the future, to assess the expected performance of the plan, to prevent undesirable outcomes. After-effect (retrospective) analysis is carried out after the implementation of business operations. It is used to monitor the plan implementation, to identify unused reserves, to assess enterprise performance and its dynamics, to discover problems in enterprise’s activity etc.

Classification of economic analysis Analysis of the results over the past years allows to explore trends, patterns of economic development, to identify unused opportunities, best practices, to discover the consequences of earlier management decisions that are important in justifying the level of economic performance in the future. Retrospective analysis provides ability to see the prospective. It is the basis of foresight.

Classification of economic analysis The depth and quality of the retrospective analysis depend on the results of a future analysis, conducted in the past. If targets are not justified sufficiently and real, then the retrospective analysis of the plan has no sense at all.

Classification of economic analysis Retrospective analysis is divided into operational and summarized. Operational analysis is conducted immediately after the business operations or change of the situation for short periods of time (shift, day, week, etc.). Its purpose – to identify weaknesses, mistakes and work on business processes quickly. Summarized (final) analysis is performed after the reporting period (month, quarter or year) and activities of the company is studied comprehensively and thoroughly

Classification of economic analysis 4. According to the direction: Intra-analysis studies only activity of the investigated enterprise and its business units. Inter-firm analysis compares the results of two or more enterprises

Classification of economic analysis 5. According to the functions, roles and tasks : financial, managerial, marketing, investment, socio-economical, environment-economical, functional-cost (value-based), logistic etc.

Classification of economic analysis Functional-cost analysis investigates the functions performed by the object, and methods for their implementation. Its main purpose is to identify unnecessary features of the object and prevent unnecessary costs by eliminating unnecessary nodes, components, simplifying product design, materials substitution, etc.

Classification of economic analysis 6. According to the method of objects studying: qualitative quantitative express-analysis fundamental marginal economic-mathematical

Classification of economic analysis Qualitative analysis - a method of research of objects, phenomena and processes, based on qualitative comparative characteristics and expert assessment, which is directed on identifying the structure of the object, on identifying influencing factors, etc. Quantitative analysis is based on quantitative comparisons and studying the degree of sensitivity of economic phenomena (object) to changes of various factors.

Classification of economic analysis Fundamental analysis is deep, comprehensive study of the essence of the phenomena based on mathematical methods and other sophisticated tools. Express-analysis is a method for diagnosing the state of the enterprise and is based on typical signs of certain economic phenomena.

Classification of economic analysis Marginal analysis - a method of assessment and justification of the effectiveness of managerial business decisions based on the causal relationship of sales, costs and profits and the division of costs into fixed and variable. Economic-mathematical analysis helps to select the most optimal solution of economic problems, identify reserves to improve production efficiency through better use of available resources.

Classification of economic analysis 7. According to the coverage of the objects: entire analysis - conclusions are made after examining of all objects without exception, selective analysis - conclusions are made after examining of only a portion of objects (sample) that can accelerate the analytical process.

Classification of economic analysis 8. According to the content of the analysis program: complex analysis - enterprise is studied thoroughly, thematic analysis - only several (or just one) of enterprise’s sides are studied, representing a certain point of greatest interest, for example, the use of material resources, production capacity, production costs

Classification of economic analysis 9. According to the subject of the analysis: internal - is conducted by enterprise staff, external – is conducted by external management bodies, banks, investors, tax and statistical bodies etc.

Economic analysis of enterprise’s activity and its economic role Economic analysis of the enterprise is a system of methods to study the performance and state of enterprise, variants for improving its activity and grounding of managerial decisions aimed at improving enterprise performance. The analysis is the link between accounting and management decisions. Due to the economic analysis management decisions, including the company's plans, become scientifically based, and management becomes objective and efficient.

Economic analysis of enterprise’s activity and its economic role Planning Organizing Motivation Control

Economic analysis of enterprise’s activity and its economic role Planning Organizing Motivation Analysis Control Accounting Decision making Adjusting

Economic analysis of enterprise’s activity and its economic role In the process of analyzing economic activity such problems are solved: • evaluating the performance of the enterprise and its individual units for the reporting period; • research trends in the company, comparing the parameters of its activities with the relevant parameters of the business competitors; • identifying and measurement of the factors that affect the object being analyzed; • identifying and measuring the value of economic reserves, that is unused opportunities to increase efficiency of the enterprise; • develop recommendations for reserves using; • scientific grounding of plans, managerial decisions; • providing the information for monitoring of managerial decisions implementation