How to do financial performance analysis of Safaid Posh?

Financial performance analysis of Safaid Posh

What are financial performance measures?

Safaid Posh is an Urdu term for the middle class and in this article, my main emphasis is to prepare financial performance measures for this social class. You could be shocked to see that you spent more than you expected when you look at your monthly spending on your bank account or credit card statement. Personal financial statements are a basic technique of accounting for income and spending that might help you avoid this dilemma. Financial statements, such as those used by businesses, provide you an overview of your financial status and can assist you in budget planning. Create a personal balance sheet and a cash flow statement to get a comprehensive picture of your financial status. Personal financial statements are the term for these reports.

Financial performance analysis

Financial performance analyzes, how effectively a person is using his/her sources of income to manage to fulfill his/her living requirements. You must first develop a balance sheet (after knowing "how to make a personal budget" by using the "Personal budget planner template" and carefully setting personal financial goals)  in order to assess your financial condition. A personal balance sheet, also known as a net worth statement, is a financial statement that shows what assets a person owns, what obligations he or she owes, and how much money they have. The difference between the amount you possess and the amount you owe is your net worth. The term "net worth" refers to a measurement of one's present financial situation. Among the assets are:

  • ·      Liquid assets (cash and items that can be quickly converted to cash)
  • ·      Land and property (land and building that a person or family owns at market value)
  • ·   Personal Property (Car, bike, computer, laptop, mobile phone, wristwatch, furniture & fixture, books, etc.)
  • ·    Assets for Investment (securities such as stocks and bonds or any other investment for the sake of capital gain and periodic returns)
  • ·   Current Liabilities (these are short-term obligations that must be paid off within a year). This category includes the majority of medical expenses, cash loans, and taxes.)
  • ·    Long-Term Liabilities (These are debts that do not have to be paid off in full for at least a year. Long-term obligations include car loans, school loans, and home loans.

It is important to note that the phrase "liabilities" only refers to money that you will owe for more than a month. A telephone bill, for example, does not qualify as an obligation. Following is the hypothetical balance sheet of an individual to measure his financial performance for the year.

      Cash Flow Statement

The money that actually goes into and out of your wallet and bank accounts is called cash flow. It is divided into two parts: cash inflow and cash outflow. The statement of cash flows includes the money you receive, or your income, such as paycheck from a job, an allowance from your parents, or interest earned in your savings account, and cash outflow includes all of the money you spend. The investing activities include your investment in stock, bonds, or real estate.  A cash flow statement is simply a summary of your cash flow during a particular period, usually a month or a year. This summary gives you important information and feedback on your income and spending patterns. Creating a cash flow statement is the next step to one such as the one shown in Personal Budget Planner Template.

      Cash Flow format in excel

In this worksheet of cash flow, measurement of financial performance will assist you in creating a personal budget. This will assist you in making financial performance projections in the future. This is especially helpful when undergoing significant life changes, such as relocating or changing employment.

In this Cash Flow Statement, we imagine a couple with young children, one of whom is a student. Furthermore, we suppose that only the male member of this household earns a living. We assumed that his monthly pay is Rs 90,000, and that he has supported himself and his family with this income. Please see the cash flow statement below, which shows his monthly financial performance in Excel using the planned Cash Flow format.

Because his net cash flow is positive, he has a surplus (shows good financial performance) — extra money that may be spent or kept, depending on his financial objectives and values. A cash excess can be deposited into an emergency fund savings account to cover unforeseen bills or to cover living expenses if you do not get a paycheck. You may also put any extra money into savings or investment accounts. However, if his net cash flow was negative, he would have a deficit. A financial condition in which more money is spent than is generated or received is referred to as a deficit. A current and accurate cash flow statement may serve as the foundation for developing and carrying out your spending, savings, and investment strategies.

Your net worth fluctuates as your net cash flow changes. Your net worth drops every time you run a deficit by spending more than you earn. To cover the gap, you either borrow money (raising your obligations) or draw from your savings (decreasing your assets). Your net worth decreases in either situation. On the other hand, if you conclude the month with a surplus, your net worth will most likely increase. You have the option of saving the money and adding it to your assets, or you may use it to pay off past obligations and lower your liabilities. Your net worth will rise regardless of the course you take. In general, if you have a cash flow surplus, your net worth grows; if you have a cash flow deficit, your net worth drops. However, net worth does not provide a comprehensive picture of your finances. Your balance sheet and cash flow statement can also be used to evaluate your financial status in other ways.

I believe this article will assist you in evaluating your financial performance by creating and utilizing a cash flow statement.

Post a Comment


Research and Reviews| Finance, economics, reviews, analyses, banks, and political economy are among the topics. ...
Verification: 0a33a83c7e367e3b