Free personal goal statement template doc sample, A Financial statement is a business’s resume reflecting the fiscal activity of the company. There are four key components which are a part of a financial statement. These elements are the balance sheet, income statement, statement of retained earnings, along with a statement of cash flow. A balance sheet accounts a company’ net equity, liability and assets. An income statement states a firm’ expenses, gains and earnings on a particular time period. A report on retained earnings documents the fluctuations in a business’ retained earnings within a time period. The statement of cash flow states a business’ working, investment, and financial cash flow. All these elements of a financial statement are used to gauge the financial ease and activity of a business. A negative or positive fiscal statement can determine if a company is in a weak or strong fiscal situation.
The use of a financial statement will be to reflect the fiscal strength or weakness of a business enterprise. Internally, it is used by a company to produce financial decisions such as hiring new employees or even layoffs. When businesses are financially struggling they look to reduce cost and the fastest way to decrease costs is to remove workers. Now in a struggling economy, workers are considered as expensive obligations, and companies and governments are trying to reduce those obligations as much as possible.
Recognizing financial statements assist managers and owners make better choices tracking the company and plan for future expansion. Financial statements provide a crystal clear understanding of the company’ strengths and weaknesses. They are critical for business owners who intend to succeed and expand their business.
Though financial statement analysis is an extremely practical tool, it has two limitations. Both of these limitations demand the comparability of financial data between companies and also the need to check past ratios. Comparison of one firm with the other can provide valuable clues regarding the financial health of an organization. Unfortunately, differences in accounting procedures between companies sometime makes it hard to compare with the companies’ financial information. For example if a single company values its inventories from the LIFO method and a different company by average price method, then direct obligations of financial data like stock valuations are and price of goods sold between the two businesses could be misleading. Some times enough data are introduced in foot notes to the financial statements to restate data to a comparable basis. Otherwise, the analyst must keep in mind the absence of comparability of this information before drawing any definite conclusion. Nevertheless, in spite of this limitation in mind, comparisons of important ratios with different businesses and with industry averages often suggest avenues for further investigation.
A business’ financial statements are an immediate connection of just how well a company is performing and if they are in a position to hire new employees or layoffs. Another alternative for companies to lower costs is by simply sending as much work overseas in which the wages are far lower and where the regulatory is a lot simpler. Nowadays, most large corporations only need as many U.S. employees as absolutely vital. In a world in which labour has been globalized, a few businesses shell out enormous amounts of money to American workers when they could save paying wages to employees abroad. In the old times, 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 today’s generation, corporations do not have the same loyalty, when a business reaches a fiscal barrier; one of the simplest and quickest ways to cut costs is to eliminate its own employees.
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