Free 015 essay example personal statement sample ~ thatsnotus personal statement template for job application pdf, Financial statements are formal records of the fiscal activities of a company, individual, or other entity. It gives an overview of a company or person’s financial requirement in both brief and long duration. It is a tool used to convey financial information of an entity to those who wishes to earn decision and informed decisions about 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. All these four fiscal statements have unique intent but they are interrelated.
The function of a financial statement will be to reflect the fiscal weakness or strength of a small business. Internally, it’s used by a company to produce financial decisions like hiring new employees or even layoffs. When businesses are financially unable they seem to decrease cost and the fastest way to reduce costs is to eliminate employees. Now in a struggling market, employees are regarded as costly obligations, and companies and authorities are attempting to reduce those liabilities as far as possible.
Managers will also be broadly concerned with the fiscal ratios. First the ratios offer hints of how well the organization and its business units are doing. A number of these ratios could ordinarily be used at a balanced scorecard strategy. The specific ratios chosen depend on the organization’s strategy. For example a company which wishes to highlight responsiveness to clients may closely monitor the stock turnover ratio. Since managers must report to shareholders and may desire to raise funds from outside sources, supervisors must pay attention to their financial ratios used by external stocks to assess the firm’s investment potential and creditworthiness.
Although financial statement analysis is a highly practical tool, it has two limitations. Both of these constraints involve the comparability of financial data between companies and the need to look beyond ratios. Comparison of one firm with another can provide valuable hints about the financial health of an organization. Unfortunately, differences in accounting procedures involving businesses sometime makes it difficult to compare with the firms’ financial information. As an instance if one company values its inventories by the LIFO method and the other firm by average cost method, subsequently direct comparisons of financial data such as inventory valuations are and price of products sold between both firms may be misleading. Some instances 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 this data before drawing any definite conclusion. But even with this limitation in mind, comparisons of key ratios with other companies and with industry averages frequently suggest avenues for additional investigation.
A company’ financial statements are an immediate connection of how well a business is performing and if they’re in a position to hire new employees or layoffs. Another choice for businesses to reduce costs is by simply sending as much work overseas in which the wages are far lower and in which the regulatory is significantly simpler. Nowadays, most big corporations only need as many U.S. workers as absolutely essential. In a world in which labor 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 person could go to college, get a good paying job with one company for 30 decades and retire with a nice pension. Unfortunately for today’s generation, corporations do not have the same loyalty, when a business reaches a financial hurdle; a few of the simplest and fastest ways to reduce costs is to eliminate its employees.
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