Financial Analysis in Operational and Strategic Decisions

Purpose: The subject of this study is economic entities using financial analysis to make decisions. The main research objective of the article is to examine the role of financial analysis in the decision-making process in enterprises. Additionally, key elements of financial analysis that are important for operational and strategic management were examined and indicated. The differentiation of the use of financial analysis depending on the type of business activity, the size of the enterprise and the scope of business activity was also determined. The study covered enterprises that met two conditions: they prepared financial statements and declared that they were performing financial analysis activities. In the paper three research questions were posed. 1. Is financial analysis a common tool in terms of operational and strategic decision-making in the company? 2. Which of the following factors: the type of business activity, the size of the enterprise and the scope of business activity, most determines the extent to which financial analysis is used to make decisions in the company? 3. Do enterprises base their decisions more on internal or external comparisons? Approach/Methodology/Design: In order to obtain answers to the research questions, a survey form containing metrics and closed questions was sent to the respondents. The study involved 111 companies operating in Poland, that declared preparation of financial analyses. The sample was diversified in terms of the type of business activity, as well as size and legal form of the company. The answers from the survey form were transferred to a spreadsheet in which basic measures of descriptive statistics (average, median, kurtosis, skewness) were calculated in various cross-sectional approaches to companies: main type of activity, size and scope of operations of the companies. Findings: The study confirms the widespread use of financial analysis — 93.7% of companies use it in operational decisions, and 86.5% in strategic ones, especially in large organizations and the manufacturing sector. Particularly intensive use of financial analysis has been observed in the manufacturing sector, where particular attention is paid to cost and profitability analysis, indicating the key role of financial management in building competitive advantage in this sector. On the other hand, service companies show less propensity to use financial analysis, which may suggest that current analytical tools are not adapted to the specifics of their activities. Practical Implications: The surveyed companies should expand the scope of their use of financial analysis, taking into account not only their own data, but also comparisons with competitors and industry indicators. It is worth promoting solutions that facilitate benchmarking and access to reliable industry indicators. The service sector should develop solutions adapted to its specificity, which bases business models on human capital and intangible assets. Originality/Value: The results of the analysis and theoretical considerations included in this article complement existing research in the field of financial analysis.