Analysis of income, expenses and financial result

In the context of its business activity, a company must ensure a level of business activity which will provide for the settlement of their ever-growing needs. A business must generate enough income through the sale of a specific amount of products (goods or services) to cover the costs and achieve a positive financial result (profit), which will enable normal business activity and the development of the company. Income is analyzed in volume and structure over a shorter and a longer period.

The purpose of the analysis of expenses is to examine the possibility of their minimization. It is important to point out that any reduction of expenses does not simultaneously mean the complete reduction of all expenses. A reduction of an individual expenditure can increase the expenditure of another element. So the effect of each individual reduction must be considered in relation to the expenses of other elements, that is, from the aspect of all expenses. Expenses are analyzed in volume and structure over a shorter and a longer period.

Financial result is the most significant segment of the business activity of a company. It is the control of a certain level of rationality and a signal to the clients who have business relations with the company whether an important security condition is being met in their working relationship. Considering that the financial result appears as the difference between income and spending, i.e. expense, all factors that influence the size and dynamics of these business segments also influence the financial result. The analysis of the financial result is performed for a longer and shorter period, just as the analysis of any other relevant features in a company. The formation and the distribution, i.e. cover of the financial result, are analyzed.

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