FINANCIAL ANALYSIS

Discuss how trends and operational issues of your organization (or one that you are familiar with) are reflected in the financial statements.

Usually financial statements are regarded as the general summaries of the monetary information of the business. The income statement, statement of changes of the financial position, statement of retained earnings as well as the balance sheet is the most common financial statements (Neely, 2007). The main users of these statements are the potential investors, creditors, management, workforce/employees, and the government regulatory authorities primarily. These statements can be drawn for manufactures and service industries, wholesalers, retailers and so on.

Therefore, the nature of this enterprise will dramatically entail all the effects if the financial data which is contained in the financial statement. The general purpose of its user will drastically impact the information which he or she will be seeking as explained below;Management will be the first one to use this information for the purpose of analyzing its position and performance as well as for taking appropriate measures which assists in improving the results of the company. Employees equally need this information for assessing the profitability of the company or the consequences of their future remuneration and job security. Owner/s use this information for the purpose of analyzing the profitability and viability of their investment or for coming up with future course of action (Neely, 2007).

Creditors as the external users will use this company’s financial information for assessing its credit worthiness. Although all the terms of credit are usually set by the creditors they remain to be in line with the assessment of the financial health of their customers.   They comprise of suppliers and lenders of finance i.e. banks. Tax authorities also will depend on this information for analyzing the general credibility of the tax returns of the company (Peterson & Fabozzi, 2012). Investors similarly will use it for determining the general feasibility of investing in this company. The reason for that is because they always desire to make or earn sufficient returns from their investment before committing any form of financial resources to it.

Customers makes use of it for determining the position of its suppliers financially. This is important since it assists in maintaining a stable source of supply for a long term. Moreover the regulatory authorities will use the company’s financial information that such as a financial disclosure is in line with the rules and regulations set (Peterson & Fabozzi, 2012). This in return will assist in protecting the stakeholders’ interests who depend on that information for decision making.

 

 

Reference

Neely, A. D. (2007). Business performance measurement: Unifying theories and integrating practice. Cambridge: Cambridge University Press.

Peterson, P. P., & Fabozzi, F. J. (2012). Analysis of Financial Statements. Hoboken: John Wiley & Sons.