Professional educational philosophy statement template doc sample, All financial statements are basically historically historic records. They tell what’s happened during a particular time period. However most users of financial statements are somewhat concerned about what will happen in the future. Stockholders are worried about future earnings and profits. Creditors are worried about the organization’s future ability to settle its debts. Managers are worried about the corporation’s ability to finance future expansion. Regardless of how financial statements are historic records, they can still provide invaluable information bearing on all of these concerns.
The role of a financial statement will be to reflect the fiscal weakness or strength of a small business. Internally, it is used by a business to produce fiscal decisions like hiring new workers or even layoffs. When companies are financially struggling they look to cut cost and the fastest way to lower costs would be to eliminate workers. Now in a struggling market, employees are considered as costly liabilities, and businesses and authorities are trying to reduce those obligations as much as possible.
Understanding financial statements help managers and owners make better choices monitoring the business and plan for future expansion. Financial statements provide a clear grasp of the company’ strengths and weaknesses. They’re essential for business owners that wish to succeed and expand their small business.
Although financial statement analysis is a highly practical tool, it has two limitations. Both of these constraints demand the comparability of financial data between companies and the need to check past ratios. Comparison of one firm with another can provide invaluable hints regarding the financial health of a company. Unfortunately, differences in accounting methods between businesses sometime makes it difficult to compare with the companies’ financial information. For instance if a single company values its stocks by the LIFO method and a different company by average price method, then direct comparisons of financial information like stock valuations are and price of products sold between the two businesses may be misleading. Some times enough information are presented 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 data before drawing any certain conclusion. Nevertheless, in spite of this restriction in mind, comparisons of key ratios with other companies and with sector averages often indicate avenues for further investigation.
A business’ financial statements are a direct relationship of how well a business is doing and if they are in a position to hire new workers or layoffs. Another option for companies to reduce costs is by simply sending as much work overseas where the salaries are far lower and in which the regulatory is significantly simpler. Today, most large corporations only need to have as many U.S. employees as absolutely necessary. In a world where labour was globalized, a few corporations shell out massive amounts of money to American workers when they could save paying lower wages to workers overseas. In the old days, a individual could go to school, get a great paying job with one company for 30 years and retire with a great pension. Unfortunately for today’s creation, corporations do not have the same loyalty, as soon as a business reaches a fiscal barrier; a few of the easiest and quickest ways to reduce costs is to remove its own employees.
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