Methodology of the Financial Analysis of Digital Companies

The subject of the article is the analytical procedures to assess the performance of digital companies. The purpose is to consider the peculiarities of digital companies on the basis of stakeholder theory, resource approach to analysis, as well as to develop the algorithms for analysis and their testing on the data of an existing company.

The methodology which comprises 6 stages and takes into account the special features of digital companies is developed. The first stage assesses a sector of economy, its profitability, risk exposure and development trends. The rationale for the higher efficiency and risk exposure of the quaternary sector of economy is provided. At the second stage the competitive advantages of a company and its peer market position are analyzed. The third stage analyzes the distribution of the company’s cash flow using stakeholder approach to analysis. At the fourth stage the analysis of the fi position of the company is made on the basis of its cash fl w assessment which involves calculation of the company’s ratios of profi , business activity, liquidity and solvency. The fifth stage provides the analysis of investment activity and efficiency of the company on the basis of its operational and investment cash flows. The sixth stage considers the value factors which are directly connected to intellectual capital and goodwill. At this stage an “innovation reward” of the company is assessed. This reward represents the measurement of value factors in monetary terms and reflects the growth rate anticipated by investors when setting the share price.

The proposed methodology makes it possible to analyze the performance of digital companies on the basis of stakeholder approach using publicly available information. The article can be useful for analysts assessing a company performance using its integrated reporting.

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