FINANCIAL DIAGNOSIS OF A COMPANY’S ACTIVITIES

Abstract

Financial diagnosis consists of a number of instruments and methods which help to evaluate a company’s financial situation and performances. The financial diagnosis identifies the favourable and unfavourable factors which will affect the company’s future activity. The purpose of financial diagnosis is to draw a comparison with similar companies, in order to establish risk, profitability, and value parameters, by estimating the cost of capital (discount rate). The financial diagnosis helps to appreciate the past and present financial situation, and based on them to make projections for the future.

Keywords

• financial diagnosis
• financial position
• profitability
• risk
• solvency
• liquidity
• sensitivity analysis