Credit risk Introduction 1.
Financial statements are financial data documents a company publishes on an annual, biannual, quarterly or monthly basis. Financial planners and accountants may use financial statements to make decisions regarding future planning, expansions and product launches, but there are disadvantages to using this method.
The Ability to Detect Patterns Financial statements reveal how much a company earns per year in sales. The sales may fluctuate, but financial planners should be able to identify a pattern over years of sales figures.
For example, the company may have a pattern of increased sales when a new product is released. The sales may drop after a year or so of being on the market. This is beneficial, as it shows potential and sales patterns so executives know to expect a drop in sales.
The budgets reveal how much wiggle room the company has to spend on launching products, developing marketing campaigns or expanding the current office size. Knowing how much money is available for planning and decision making ensures that the company does not spend more than expected.
Based on Market Patterns One disadvantage of using financial statements for decision making is that the data and figures are based on the market at that given time. Depending on the market, it may change quickly, so executives should not assume that the numbers from a previous financial statement will remain the same or increase.
Just because a company has sold 5 million copies of a product during one year does not guarantee it will sell the same amount or more. It may sell much less if a competitor releases a similar product.
At-One-Time Analysis Another disadvantage is that a single financial statement only shows how a company is doing at one single time. The financial statement does not show whether the company is doing better or worse than the year before, for example.
If executives decide to use financial statements for making decisions about the future, they should use several financial statements from previous months and years to ensure they get an overall picture of how much the company is doing.
The financial statement becomes a continuous analysis, which is more useful than using a single statement. References 2 The Free Dictionary: She holds a Master of Arts in psychology of language use from the University of Copenhagen in Denmark.This functionally decreases materiality for state and local government financial statements by an order of magnitude compared to materiality for private company financial statements.
Due to the unique concept of materiality, the auditor's report expresses an opinion in relation to each opinion unit. Financial analysis can be used to identify the profit drivers and business risks in order to assess the profit potential of the firm.
It helps in the future growth scenarios of the firm Limitations Of Financial Statement. Historical Analysis. Financial statement analysis is a historical analysis. It analysis what has happened till date. An Essay on the Effects of Taxation on the Corporate Financial Policy George Contos, Internal Revenue Service negative relation between tax rates and debt.
However, the effects of taxation on the corporate financial policy, --). The. Financial Performance Analysis-A Case Study 1Amalendu Bhunia, Financial performance analysis is the process of a firm from accounting and financial statements.
The goal of such analysis is to determine the efficiency and performance of firm’s management, as reflected in the. iii Abstract Risk management has become an important topic for financial institutes, especially since the business sector of financial services is related to conditions of uncertainty.
Management Of Risks Involved In It Business Finance Essay Abstract. After finishing my three semesters of masters’ degree the challenge of completing my study at university continued to draw.