Question

What does operating analysis provide that is different than financial analysis, give an example

Answer 1

Operating analysis deals with the analysis of business processes and how the operating metrics are showing. In a pure financial analysis, we can see revenue growth, margin expansion or reduction in cost of goods sold etc.

The operating analysis would for example reveal a volume growth and with that give an indication of the competitive position in the industry and any gain in market share etc. Also if the average inventory has come down or number of over due orders has gone down, this would suggest increase in supply chain effectiveness and that would only come out in a operational analysis.