ACC 305 Week 5 Final Assignment

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Financial Information

ACC 305
Brenda Forde

Financial Information
It is important for every internal and external stakeholder in a company to understand if a company is being profitable or not. A company that is failing or not growing can often come from poor financial planning and analysis. The difference between failure and success come from analyzing financial information. Analyzing financial information such as balance sheet, income statement and cash flow statement companies can predict and control their future. Financial statements are the primary documents used in reporting financial information to banks, investors, suppliers and others. Along with financial information, financial ratios can help stakeholders evaluate the business performance. They can deliver a better understanding of a variety of things going on in the company. Financial information and ratios are important tools to help predict the growth of a company and to compare them to other companies.

Stakeholder can consist of both internal (employees, managers, board members, etc.) and external (investors, customers, suppliers, etc.). As a stakeholder in a company, it is very important to know how the company is performing. Financial reporting can deliver information to help them know how profitable the company is or not. Investors and creditors have the right know if their investment is being spent sensibly and if they will be getting a return on their investment. Employees want to know if the company they are working for is doing good or bad so they can plan for the future. If the company is not doing well, they might not get a raise or the company could go bankrupt and they could be without a job. Many internal stakeholders have stock options with the company; therefore it is important for them to know if the company they are working for will be making money or not which in turn will make them money. All stakeholders, internal or external, want to know how their investments are being handled therefore, reviewing the company’s financial statements become very important. Financial statements can help stakeholders know how profitable the company is, how assets stack up to liabilities, where did the business get its capital, how much money was invested, is the investment getting used wisely, did the company reinvest its profit, and does the business have enough capital for future growth. There are a couple of different financial reports that provide stakeholders with important financial information like balance sheet, income statement, and cash flows statement.

The balance sheet can reflect the financial position of a company. It shows how the company is doing on a particular date. According to Huang & Zhang (2012), the balance sheet is an important part of a financial report which informs investors of the sources and uses of financial resources for the company’s operations as it provides necessary information for evaluating the value of the company. The balance sheet displays the company’s assets, liabilities, and shareholders’ equity. The assets which can include cash, fixed assets and intangibles (trademarks, patents, goodwill, etc.) are listed on the left side or top of the balance sheet. On the right side of or below the assets on the balance sheet are liabilities and shareholders’ equity. The liabilities that must be paid first are listed at the top. Current liabilities are listed before long term debt. Shareholders’ equity gets listed last because they must wait to see if there is any money left. The difference between assets and liabilities shown on the balance sheet is shareholders’ equity (net worth). The dollar value which has been agreed upon at the time of the transactions is what is recorded on the balance sheet. Stakeholders can analyze the balance sheet by examining the major categories listed. Unlike a balance sheet, this presents the companies list of assets, an...
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