Essay example personal statements for ge examples job personal statement template for job application example, All financial statements are basically historically historic records. They tell what has occurred during a particular period of time. However most users of financial statements are concerned about what will happen later on. Stockholders are concerned with future earnings and profits. Creditors are worried about the company’s future ability to settle its debts. Managers are worried about the company’s ability to fund future growth. Regardless of how financial statements are historical documents, they can nevertheless offer valuable information bearing on all of these concerns.
Financial statement analysis involves careful selection of information from financial statements to the main goal of forecasting the fiscal health of the corporation. This can be accomplished by examining trends in key financial information, comparing fiscal data across companies, and analyzing key financial ratios.
Managers will also be broadly worried about the fiscal ratios. First the ratios provide indicators of how well the organization and its business units are doing. Some of these ratios would ordinarily be used in a balanced scorecard approach. The specific ratios chosen are contingent on the provider’s strategy. For example a business that wants to highlight responsiveness to customers may closely track the stock turnover ratio. Since managers must report to investors and may wish to raise funds from external sources, supervisors must look closely at their financial ratios used by outside inventories to assess the firm’s investment potential and creditworthiness.
Although financial statement analysis is an extremely useful tool, it has two limits. These two limitations demand the comparability of financial information between businesses and the need to look beyond ratios. Comparison of one firm with another can offer valuable clues about the financial health of an organization. Unfortunately, gaps in accounting procedures between businesses sometime makes it tough to compare with the companies’ financial information. For instance if one company values its inventories from the LIFO method and another firm by average price method, then direct comparisons of financial information such as stock valuations are and cost of products sold between both firms may be misleading. Some instances enough information are introduced in foot notes to the financial statements to restate data to a similar basis. Otherwise, the analyst must keep in mind the absence of comparability of the data before drawing any definite conclusion. Nevertheless, even with this restriction in mind, comparisons of important ratios with different businesses and with sector averages frequently indicate avenues for additional investigation.
A company’ financial statements are a direct relationship of just how well a business is performing and if they are in a position to hire new workers or layoffs. Another option for companies to lower costs is by sending as much work abroad in which the wages are far lower and where the regulatory is much simpler. Nowadays, most large corporations only need as many U.S. employees as absolutely necessary. In a world where labour was globalized, a few businesses shell out enormous amounts of cash to American workers when they can save paying wages to employees overseas. In the old days, a individual can go to college, get a great paying job with a single company for 30 years and retire with a great pension. Unfortunately for today’s creation, corporations don’t have exactly the identical loyalty, as soon as a company reaches a monetary barrier; one of the simplest and quickest ways to cut costs is to eliminate its employees.
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