Editable personal qualifications statement template example, A Financial statement is a corporation’s resume reflecting the fiscal activity of the business. There are four key elements which are a part of a fiscal statement. These components will be the balance sheet, income statement, statement of retained earnings, and also a record of cash flow. A balance sheet reports a company’ net equity, assets and liability. An income statement states a business’ expenses, gains and income over a particular time period. A report on retained earnings records the changes in a business’ retained earnings over a period of time. The statement of cash flow states a business’ operating, investment, and financial income flow. These elements of a financial statement are used to judge the financial profitability and activity of a business enterprise. A negative or positive financial statement can determine if a company is in a strong or weak fiscal situation.
The function of a financial statement is to reflect the fiscal weakness or strength of a business enterprise. Internally, it is used by a company to create financial decisions such as hiring new employees or even layoffs. When companies are financially incapable they seem to lower cost and the quickest way to cut costs is to remove employees. Now in a struggling market, workers are considered as costly obligations, and companies and authorities are trying to decrease those obligations as much as possible.
Knowing financial statements help managers and owners make better choices tracking the company and strategy for future growth. Financial statements provide a clear grasp of the business’ strengths and weaknesses. They are critical for business owners that wish to succeed and expand their business.
Although financial statement analysis is a highly practical tool, it has two limitations. These two constraints demand the comparability of financial data between companies and the need to look beyond ratios. Comparison of one firm with another can provide invaluable clues regarding the financial health of a company. Unfortunately, gaps in accounting methods involving companies sometime makes it difficult to compare the firms’ financial information. For example if one company values its inventories from the LIFO method and the other company by average price method, subsequently direct comparisons of financial data like stock valuations are and cost of products sold between the two firms might be deceptive. Some times enough information are presented in foot notes to the financial statements to restate data to a similar basis. Otherwise, the analyst should remember the absence of comparability of this information before drawing any definite conclusion. But even with this restriction in mind, comparisons of key ratios with different companies and with industry averages frequently suggest avenues for further investigation.
A business’ financial statements are a direct connection of just how well a business is performing and if they’re in a position to hire new employees or layoffs. Another option for companies to cut costs is by sending as much work overseas where the wages are much lower and in which the regulatory is a lot simpler. Nowadays, most large corporations only need as many U.S. employees as absolutely necessary. In a world in which labor has been globalized, some corporations shell out massive amounts of money to American workers when they could save paying lower wages to employees abroad. In the old days, a individual can go to school, get a great paying job with a single company for 30 years and retire with a nice pension. Unfortunately for the current generation, corporations don’t have exactly the same loyalty, as soon as a company reaches a financial hurdle; one of the simplest and quickest ways to decrease costs is to eliminate its employees.
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