Best condo association financial statement template word example, Financial statements are formal documents of the fiscal activities of a business, person, or other entity. It gives a summary of a company or person’s fiscal condition in both brief and long term. It is a tool used to convey financial information about an entity to those who would like to earn determination and informed judgments concerning the entity’s financial position, results of performance and cash flows. There aren’t any financial statements Balance Sheet, Income Statement, Statement of Cash Flows and Statement of changes in owner’s equity. These four financial statements have special intent but they’re interrelated.
The use of a financial statement will be to reflect the fiscal weakness or strength of a business enterprise. Internally, it is used by a business to make fiscal decisions like hiring new employees or even layoffs. When companies are financially unable they look to lower cost and the quickest way to cut costs would be to remove employees. Now in a struggling market, workers are considered as expensive obligations, and companies and authorities are trying to reduce those obligations as far as possible.
Managers are also widely worried about the fiscal ratios. The ratios supply indicators of how well your business and its business units are doing. A number of these ratios could ordinarily be used in a balanced scorecard strategy. The specific ratios selected depend on the firm’s strategy. For example a business which wishes to highlight responsiveness to customers may closely track the stock turnover ratio. Since supervisors must report to investors and may want to raise funds from outside resources, supervisors must pay attention to the financial ratios used by external stocks to rate the organization’s investment potential and creditworthiness.
Though financial statement analysis is an extremely useful tool, it has two limitations. Both of these constraints demand the comparability of financial data between businesses and also the need to check past ratios. Comparison of a single company with the other can offer valuable hints regarding the financial health of an organization. Unfortunately, differences in accounting procedures between companies sometime makes it tough to compare the companies’ financial information. As an instance if a single firm values its stocks by the LIFO method and a different company by average cost method, subsequently direct comparisons of financial information like stock valuations are and price of goods sold between the two businesses could be deceptive. Some instances enough information are introduced in foot notes to the financial statements to restate information to a comparable basis. The analyst should remember the lack of comparability of the information before drawing any definite conclusion. Nevertheless, despite this restriction in mind, comparisons of key ratios with different businesses and with business averages frequently suggest avenues for further investigation.
Few figures appearing financial statements have much importance standing independently. It is the connection of one figure to another and the amount and direction of change over time that are important in financial statement analysis. How does the analyst key in on important relationship? How can the analyst dig out the important trends and changes at a company? Three analytical techniques are frequently utilized; dollar and percent changes on statements, common-size statements, and financial ratios formulas.
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