Financial statement presents the information about the financial performance of a company in a specific period of time. Financial Statements can be divided into 3 sections. The first one if Balance sheet; second one is profit & loss statement; third one is cash flow statement. The balance sheet discloses information on assets, liabilities and stock holder's equity.
The purpose of financial statement varies from person to person. People look at the financial statement to know the financial performance of the company. If the financial statement is healthy with good operating profit, people would be interested in investing in that company. This is the reason why, accounting regulatory bodies demand companies to follow specific procedures to come up with transparent information. By looking at the financial statement, it would be easier for people to understand how a company has performed in specific period of time.
[...] Cash flow statement gives information about the liquidity of the company to the creditors. Government agencies are also considered to be the stakeholders of the company. Government agencies will look into the financial statements of the companies to know whether the reports are made as per the rules and procedures enforced by them. Companies need to mention the taxes and duties supposed to be paid as per the rules. How to determine if any fraudulent or illegal activity has taken place in financial statements? [...]
[...] Documents that carry information about the taxes, major transactions would be kept away from the auditors while preparing the fraudulent financial statements. When an investigation starts on any companies, scrutinizing the financial statements will be given high priority. With the help of fraudulent auditors, top management of the companies will try to create some fake documents that support some major transactions that will act in favor to the company. Forensic analysis will be much more helpful for the investigative agencies while trying to determine the fraudulent activities in the financial statements. [...]
[...] As mentioned above people use financial statement for various purposes. An investor looks into the financial statement to decide whether to invest in the company's shares or not. If a company is going well with good operating profits, it clearly indicates that the company has done a great job in the past one year. Investors would be interested to invest in that company. Creditors use balance sheet to understand the company's cash and debt levels. Balance sheet also gives information about inventory, and account receivables to creditors. [...]
[...] What kind of information would be found on the financial statements? Financial Statement presents the information about the financial performance of a company in a specific period of time. Financial Statements can be divided into 3 sections. The first one if Balance sheet; second one is profit & loss statement; third one is cash flow statement. The balance sheet discloses information on assets, liabilities and stock holder's equity. The purpose of financial statement varies from person to person. People look at the financial statement to know the financial performance of the company. [...]
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