Professional bank account statement template pdf example, Financial statements are all formal documents of their financial activities of a company, individual, or other thing. It gives a synopsis of a company or person’s fiscal condition in both short and long duration. It is a tool used to communicate financial information about an entity to those who wishes to earn determination and informed judgments about the entity’s financial position, results of performance and cash flows. There are four financial statements Balance Sheet, Income Statement, Statement of Cash Flows and Statement of changes in owner’s equity. All these four financial statements have special function but they’re interrelated.
The purpose of a financial statement is to reflect the financial weakness or strength of a business enterprise. Internally, it is used by a company to produce fiscal decisions such as hiring new workers or even layoffs. When companies are financially unable they look to lower cost and the fastest way to cut costs is to eliminate employees. Today in a struggling economy, workers are regarded as expensive liabilities, and businesses and governments are trying to reduce those obligations as far as possible.
Recognizing financial statements assist managers and owners make better decisions tracking the company and strategy for future growth. Financial statements give a clear grasp of the business’ strengths and weaknesses. They are critical for business owners who intend to succeed and expand their organization.
Though financial statement analysis is a highly practical tool, it has two limits. Both of these limitations involve the comparability of financial information between businesses and the need to check beyond ratios. Comparison of a single company with another can provide invaluable hints regarding the financial health of a company. Unfortunately, differences in accounting methods between companies sometime makes it hard to compare the companies’ financial data. By way of example if a single company values its inventories by the LIFO method and another firm by average cost method, subsequently direct comparisons of financial information such as stock valuations are and price of products sold between the two businesses may be misleading. Some times enough data are presented in foot notes to the financial statements to restate information to a comparable basis. The analyst must keep in mind the absence of comparability of this information before drawing any certain conclusion. Nevertheless, even with this limitation in mind, comparisons of important ratios with different companies and with sector averages often indicate avenues for further investigation.
A company’ financial statements are an immediate relationship of how well a business is performing and if they are in a position to hire new workers or layoffs. Another option for businesses to lower costs is by sending as much job overseas where the salaries are much lower and where the regulatory is much simpler. Nowadays, most large corporations only want as many U.S. employees as absolutely crucial. In a world in which labor has been globalized, some businesses shell out massive amounts of cash to American employees when they can save paying lower wages to employees overseas. In the old times, a individual can go to college, get a good paying job with one company for 30 years and retire with a great pension. Unfortunately for today’s generation, corporations don’t have the identical loyalty, when a business reaches a fiscal barrier; one of the simplest and fastest ways to reduce costs is to remove its workers.
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