Ppt 1 fundraising fundamental case for support fundraising case statement template sample, A Financial statement is a business’s resume reflecting the financial activity of the enterprise. There are four key elements that are part of a financial statement. These components will be the balance sheet, income statement, statement of retained earnings, and a statement of cash flow. A balance sheet accounts a business’ net equity, liability and assets. An income statement says a company’ expenses, profits and income over a particular time period. A statement of retained earnings records the changes in a business’ retained earnings over a time period. The statement of cash flow states a business’ working, investment, and financial cash flow. All these components of a financial statement are used to judge the financial ease and activity of a business. A positive or negative fiscal statement can ascertain if a business is in a weak or strong fiscal position.
The use of a financial statement is to reflect the financial weakness or strength of a company. Internally, it’s used by a company to create financial decisions such as hiring new workers or layoffs. When businesses are financially incapable they seem to decrease cost and the quickest way to decrease costs is to remove employees. Today in a struggling economy, employees are regarded as expensive liabilities, and businesses and authorities are working to reduce those liabilities as much as they can.
Recognizing financial statements help owners and managers make better choices tracking the business and strategy for future growth. Financial statements give a crystal clear understanding of the company’ strengths and weaknesses. They are vital for business owners who intend to succeed and expand their organization.
Although financial statement analysis is a highly practical instrument, it has two limitations. These two limitations demand the comparability of financial data between companies and the need to check beyond ratios. Comparison of one company with another can provide invaluable hints regarding the financial health of a company. Unfortunately, gaps in accounting methods involving companies sometime makes it tough to compare with the firms’ financial information. For instance if one company values its stocks from the LIFO method and another company by average cost method, subsequently direct obligations of financial information like stock valuations are and cost of products sold between the two firms might be misleading. Some instances enough data are introduced in foot notes to the financial statements to restate information to a similar basis. Otherwise, the analyst must keep in mind the lack of comparability of this information before drawing any certain conclusion. But in spite of this restriction in mind, comparisons of important ratios with different businesses and with sector averages frequently suggest avenues for additional investigation.
Few characters emerging on financial statements have much significance standing independently. It is the connection of a single figure to the quantity and direction of change over the years that are important in financial statement analysis. How does the analyst crucial in on important relationship? How can the analyst dig the critical trends and changes in a company? Three analytical methods are widely used; dollar and percentage changes on statements, common-size statements, and financial ratios formulations.
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