Financial Statements ACC280 Name March 11, 2010 Instructor Financial Statements Accounting is used to track an organization’s funds as well as organize the financial data for users to analyze. Financial statements are the key to understanding an organizations financial well-being. It presents the organization’s historical and potential financial performance that will assist the organization in making informed decisions. The four basic financial statements are in an organization’s annual report. Each of the four statements provides important organizational financial data for any user internal or external to analyze.
Employees can use this statement to estimate if the company will be able to afford compensation. Externally, investors and creditors can utilize a company’s cash flow statements to assess the liquidity position of a company and estimate the financial strength of the organization (SEC,
Decide 3. Act 4. Review You start with the assess stage; this is where you clarify you financial goals and work on prioritising them (Brown and Shipman, 2012). These goals could be personal or household goals; or a mix of both. You then need to work out your resources (income) and constraints (expenditures). This stage is used to help realise if the current financial position is likely to lead to achieving the goals you set out – this can be done through research of seeking out professional advice.
These ratios assess the ability of the company to generate earnings, profits and cash flows relative to some metric, often the amount of money invested. They highlight how effectively the profitability of a company is being managed. Common examples of profitability ratios include return on sales, return on investment, return on equity, return on capital employed, return on capital invested, gross profit margin and net profit margin. All of these rations indicate how well this company is performing at generating profits or revenues relative to a certain metric. Solvency ratios this is one of many ratios used to measure a company’s ability to meet long-term obligations.
At my work I help individuals with budget plans, etc. 4. Describe how and when to access specialist expertise about managing financial affairs. Specialist expertise can be sought in cases where the power of attorney may need to be agreed if the service user is of a mental state that they are no longer able to make decisions for themselves. In this instance the service user will name the person they wish to be their power of attorney then fill in a form available from
Evaluations of this information provides insight regarding a company’s ability to productively useeconomic resources as well as providing a basis for further shareholder assessments of prospective risks and returns. Based on this, one may conclude it is an extraordinarily basic yet important element of financial infrastructure. These evaluations consist of three reports that provide a company options for communicating the state of the internal control structure. The options can be evaluated under established criteria commonly found in Committee of Sponsoring Organizations (COSO), Control Objectives for Information and related Technology (COBIT), and International Organization for Standardization (ISO) 17799/27002
Pro forma financial information is generally used to illustrate the effects of transactions such as business combination, and change in capitalization. There are countless reasons on why companies use pro forma statement in their business, the most significant is the planning and control received when using pro forma. The process of using pro forma statements are less time consuming, they help businesses evaluate and make a better distinction between business plans (Scarborough, Wilson, & Zimmerer, 2009, p. 196). Pro forma statements are an excellent outlet for resources that will help a business forecast expected earnings should the company chose to merge with another company or even if the company wanted to sell off part of it operations (Scarborough, Wilson, & Zimmerer, 2009, p. 196). The pro forma statements are commonly used when applying for a business loan.
To achieve this, the management needs to make viable and reliable business decisions regarding the operations of the entity on continuous basis (Taparia, 2004). The information contained in the four financial statements put the management in a better position of realizing this objective considering that it assists in the identification of the weaknesses and strengths of different organizations on top of showing important trends in their performance during different financial periods (Alvarez & Fridson, 2011). The comparative information provided in the financial statements assist the management to compare its past performances as well as its current one with those of its competitors in order to come up with efficient strategies to better a firm’s performance (Taparia, 2004). Calculation of different financial ratios from these statements specifically yields the information to be used by the management while undertaking all decision making exercises (Alvarez & Fridson,
Explain the rationale for using the IRR to evaluate capital investment projects. Could the IRR for this project differ for GP Manufacturing versus for another customer? IRR= 14.1% (cell B70) IRR is used to decide whether investors should make long term investments. IRR depends on how much a company actually makes so it will be different for everyone 4. Suppose one of GP Manufacturing’s executives typically uses the payback as a primary capital budgeting decision tool and wants some payback information.
The management of the company has decided to introduce changes to the business processes. The business process of the company would be enhanced through the use of latest technology. The goal of the management is to increase the sales revenue for the company by focusing more on the customer relationship management initiatives. Furthermore, the company also wants to analyze the analytical customer relationship management program. However, the final decision for the implementation of this analytical CRM project depends on the return on investment and the adequate payback period.