Best customer statement of account template word sample, All financial statements are essentially historically historical records. They tell what has happened during a specific time period. Nevertheless most consumers of financial statements are somewhat worried about what’s going to occur in the future. Stockholders are worried about future earnings and dividends. Creditors are concerned with the business’s future ability to repay its debts. Managers are worried about the provider’s ability to finance future growth. Regardless of the fact that financial statements are historic documents, they can still offer invaluable information bearing on all of these concerns.
The function of a financial statement is to reflect the financial strength or weakness of a company. Internally, it’s used by a company to make fiscal decisions like hiring new employees or layoffs. When businesses are financially unable they seem to decrease cost and the quickest way to lower costs is to eliminate workers. Today in a struggling market, employees are regarded as expensive liabilities, and companies and governments are trying to reduce those liabilities as much as possible.
Knowing financial statements help managers and owners make better choices monitoring the company and plan for future growth. Financial statements provide a very clear understanding of the business’ strengths and weaknesses. They are vital for business owners that intend to succeed and expand their small business.
Though financial statement analysis is a highly useful tool, it has two limits. Both of these limitations involve the comparability of financial information between companies and also the need to check beyond ratios. Comparison of one firm with the other can offer valuable hints about the financial health of an organization. Unfortunately, differences in accounting methods between companies sometime makes it hard to compare with the companies’ financial data. For instance if one firm values its inventories from the LIFO method and a different firm by average cost method, subsequently direct obligations of financial information like stock valuations are and price of goods sold between both businesses may be misleading. Some times enough information are presented in foot notes to the financial statements to restate information to a comparable basis. The analyst must keep in mind the absence of comparability of the information before drawing any certain conclusion. Nevertheless, in spite of this restriction in mind, comparisons of important ratios with other companies and with sector averages often suggest avenues for further investigation.
A company’ financial statements are an immediate relationship of just how well a company is doing and if they are in a position to hire new workers or layoffs. Another alternative for businesses to reduce costs is by sending as much job overseas in which the wages are far lower and in which the regulatory is a lot simpler. Today, most large corporations only need as many U.S. workers as absolutely necessary. In a world where labor was globalized, a few businesses shell out enormous amounts of money to American workers when they could save paying wages to employees abroad. In the old times, a individual can go to school, get a great paying job with one company for 30 years and retire with a nice pension. Unfortunately for the current generation, corporations don’t have exactly the same loyalty, when a company reaches a monetary barrier; a few of the easiest and fastest ways to cut costs is to eliminate its own employees.
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