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What Is Paper Industry Analysis?

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  • Written By: A. Garrett
  • Edited By: John Allen
  • Last Modified Date: 03 September 2016
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Paper industry analysis is the evaluation of a business or investment's profit potential within the paper industry. This form of business analysis uses industry trends, financial statements, and intangible factors unique to the industry. Businesses seeking to expand operations and investors looking for opportunities to grow capital through this field employ paper industry analysis. The use of such industry analytics gives these entrepreneurs and investors detailed insight into the history and financial health of this economic sector. They use this information to develop business models, estimate costs, and determine the likelihood that a venture into the paper industry will be profitable.

Most forms of paper industry analysis begin with fact-finding. An investor's goal during this stage of paper industry analysis is to understand the overall nature of the field. Knowing the industry's history, primary companies, and revenue sources helps the evaluator comprehend industry-specific traits and provide the foundation for the later stages of paper industry analysis. Evaluators find this general information by reading trade publications, financial magazines, and industry outlook reports published by financial analysts. Such research can be done online, using library resources, or by hiring a professional.

Historically, the paper industry has been comprised of manufacturers, wholesalers, and raw materials traders. Paper is processed, produced, and sold for a wide variety of uses including education, publication, and sanitation. Researchers will find the that industry's productivity and growth is correlated to technological advancements in the manufacturing process.

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The primary goal of paper industry analysis is to find the markets within the industry that increase the odds of profitability. Data collected during the fact-finding phase of paper industry analysis facilitates the delineation of these market segments. Financiers review the balance sheets and income statements of the companies they identified to determine how the nature of the industry and competition with other competitors impacts net profit. The combined revenue of these companies is indicative of the total market size and consumer demand.

Conductors of paper industry analysis also conduct socioeconomic evaluations. They must identify the laws and regulations that govern the industry in order to ensure their company's compliance. Federal or state regulations also have the ability to increase the costs of doing business or cap potential profits. This stage of paper industry analysis also reveals labor costs associated with raw materials processing, employee insurance rates, and the potential impact of worker's unions.

Increased environmental awareness has limited the availability of raw paper and led to increased costs. Furthermore, the production of recycled paper raises manufacturing expenses. Most personnel in the manufacturing segment of the paper industry are represented by unions, while the wholesale segment is sensitive to economic shifts and can be negatively affected by downward business cycles.

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