Editable 50 statement of purpose examples graduate school mba phd statement of purpose template excel, Financial statements are appropriate records of the financial activities of a business, person, or other thing. It gives a summary of a business or person’s financial requirement in both brief and long term. It’s a tool used to communicate financial information of a thing to those who wants to make determination and informed decisions concerning the entity’s financial position, results of performance and cash flows. There are four financial statements Balance Sheet, Income Statement, Statement of Cash Flows and Statement of changes in owner’s equity. These four financial statements have special function but they are interrelated.
The use of a financial statement will be to reflect the fiscal strength or weakness of a small business. Internally, it’s used by a business to produce financial decisions like hiring new workers or layoffs. When companies are financially struggling they look to cut cost and the fastest way to lower costs would be to eliminate employees. Today in a struggling economy, workers are considered as expensive liabilities, and businesses and authorities are working to reduce those liabilities as much as they can.
Managers are also broadly concerned with the financial ratios. The ratios supply indicators of how well your organization and its business units are doing. A number of these boosters could ordinarily be used in a balanced scorecard strategy. The specific ratios selected are contingent on the company’s strategy. For example a business that wants to emphasize responsiveness to clients may closely track the inventory turnover ratio. Since supervisors must report to shareholders and might want to increase funds from external resources, supervisors must look closely at the financial ratios used by outside stocks to appraise the organization’s investment potential and creditworthiness.
Although financial statement analysis is an extremely useful tool, it has two limits. Both of these limitations demand the comparability of financial information between businesses and also the need to look past ratios. Comparison of one company with the other can provide valuable clues about the financial health of an organization. Unfortunately, differences in accounting procedures between companies sometime makes it difficult to compare the firms’ financial data. For instance if one company values its inventories from the LIFO method and another company by average cost method, subsequently direct comparisons of financial data like inventory valuations are and cost of goods sold between the two businesses could be deceptive. Some times enough information are introduced in foot notes to the financial statements to restate data to a similar basis. Otherwise, the analyst must remember the absence of comparability of the information before drawing any certain conclusion. But in spite of this restriction in mind, comparisons of important ratios with other businesses and with industry averages frequently suggest avenues for further investigation.
A business’ financial statements are a direct relationship of just how well a company is doing and if they’re in a position to hire new employees or layoffs. Another choice for businesses to lower costs is by simply sending as much job overseas where the wages are far lower and in which the regulatory is a lot simpler. Today, most large corporations only want to have as many U.S. employees as absolutely essential. In a world in which labor was globalized, some businesses shell out enormous amounts of cash to American employees when they could save paying wages to employees abroad. In the old days, a individual could go to college, get a good paying job with one company for 30 years and retire with a great pension. Unfortunately for the current creation, corporations do not have exactly the identical loyalty, when a business reaches a financial hurdle; a few of the simplest and quickest ways to lower costs is to eliminate its workers.
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