Question

Agree or Disagree and Why? A financial statement is a statement that reports all relevant financial information, presented in a “structured manner and in a form easy to understand for managerial use for taking prompt and informed decision making related to investment” (Blessing and E.E. 2015). The analysis of financial statements evaluates the past and current financial situation of a company, allowing it to establish estimates and predictions about future scenarios. Financial analysis is crucial in maintaining a successful business. When an analysis is done properly, the manager or senior executives can identify the problems of the company (e.g., deficiencies, negative patterns) and take the necessary corrective actions. The basic financial statements are the balance sheet, income statement, cash flow statement, and the statement of shareholder’s equity. The Balance Sheet, or statement of financial position, provides an overview of the financial strength of a company at a specific date, shows what the business owns, what it owes and the capital that has been invested. According to Harvard Business School, and Society for Human Resource Management (US) the balance sheet “tells you how efficiently a company is utilizing its assets and managing its liabilities in pursuit of profits” (41). The income statement shows you money coming in, revenues, versus the expenses associated to generate those revenues over a specific period. This statement allows the manager to see how the company has performed and whether it has made a satisfactory profit. The cash flow statement reports the flow of cash in and out of the company. This is important because it shows the ability of a business to have enough cash on hand to pay its expenses and purchase assets. The statement of cash flows is “particularly important in understanding an enterprise for purposes of investment and credit decisions” (Williams, Jan R., et al. 38). Lastly, the statement of shareholder’s equity or the statement of retained earnings summarizes all the changes that occurred in the stockholders' equity accounts during a reporting period. This statement is important because it shows whether a company borrows funds to operate or relies on its cash.

Answer 1

AGREE. As said in this statement a financial statement includes structured information about the company's financial aspects.All the financial things happened in a year will be reported in a organised manner through financial statements with the help of income statement, Balance sheet , cash flow statements and owners equity statements.A company's actual financial position can be identified by examining its financial statements.

The management of the company will always analyse the financial statements to take proper decisions for the company.A proper analysis of financial statements will always help managers to make better decision by letting them know the past details of the company and its historical data.Knowing historical data will enable management to make a correct decision for the future by understanding the present situation of the company.While making policies for the future,these financial statements will help the management in analytical thinking to make apt policies for the companies.Each of the components of financial statements will deliver different information to the various stake holders of the company.Balance sheet will deliver the asset proposition held by the company and how liabilities of the company.Like this each components like income statement , cash flow statements and owners equity will give relevant information about the company's income and expenditure,cash inflows and cash out flows , capital structure etc.So financial statements are very relevant for the company.