What Is Comprehensive Analysis?

Comprehensive analysis, in the financial world, refers to the complete analysis of every relevant aspect of a company's financial operations. The goal of such analysis is to provide a complete picture of the financial status of a company both in the current time and projected into the future. Performing a comprehensive analysis requires gathering all of the information from a company's financial reports, including both the most current report as well as reports from the past. This information is used to calculate financial ratios, which are metrics used to measure different aspects of a company's operations and compare them to similar companies within the same industry.

When investors set out to decide which companies deserve their capital, they often do a rigorous examination of the company's financial information. In this way, they can best decide whether or not a company is a worthy investment. By the same token, the companies themselves may wish to find out how well their numbers stack up to other competitors in the same industry. A comprehensive analysis can achieve these goals by dissecting every aspect of a company's financial data.

One important factor to consider when performing a comprehensive analysis on a company is that the results will only be as accurate as the data which goes into it. This is especially true when attempting to project a company's financial status into some time in the future. Since any future predictions can only be approximations, the data behind those estimates must be extremely precise to prevent incorrect assumptions.

Once all of the data is collected, the next step in a comprehensive analysis is to come up with financial ratios. These ratios generally take one piece of financial information and divide it into another piece to come up with a ratio. Ratios can be used to interpret the strength of practically every important aspect of a company's financial operations, including its profitability, liquidity, debt levels, cash flow, and so on.

These ratios, however, have little importance as simply raw numbers. Knowing, for example, that a company can pay off all its current debt and still have 20 percent of the original amount of its assets intact doesn't mean a whole lot without some context for judging it. That is why one of the final steps of comprehensive analysis should be comparing these ratios to the ratios of other financial leaders within the same industry. Doing this comparison will give an idea of where the company is thriving and what areas need improvement.