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    1.1 Background of The Study

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    Taslima Aktar
    Financial statements are important documents that provide information on a company's financial performance and position. They include information such as income, expenses, assets, liabilities, and cash flows. Accurate and organized financial statements are crucial for effective business management, decision making, identifying growth opportunities, and building trust with investors, lenders, and suppliers. Analyzing financial statements allows a company to assess its financial strengths and weaknesses and make informed long-term and short-term plans.

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    1.1 Background of The Study

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    Taslima Aktar
    88 views4 pages
    Financial statements are important documents that provide information on a company's financial performance and position. They include information such as income, expenses, assets, liabilities, and cash flows. Accurate and organized financial statements are crucial for effective business management, decision making, identifying growth opportunities, and building trust with investors, lenders, and suppliers. Analyzing financial statements allows a company to assess its financial strengths and weaknesses and make informed long-term and short-term plans.

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    Financial statements are important documents that provide information on a company's financial performance and position. They include information such as income, expenses, assets, liabilities, and cash flows. Accurate and organized financial statements are crucial for effective business management, decision making, identifying growth opportunities, and building trust with investors, lenders, and suppliers. Analyzing financial statements allows a company to assess its financial strengths and weaknesses and make informed long-term and short-term plans.

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    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    88 views4 pages

    1.1 Background of The Study

    Uploaded by

    Taslima Aktar
    Financial statements are important documents that provide information on a company's financial performance and position. They include information such as income, expenses, assets, liabilities, and cash flows. Accurate and organized financial statements are crucial for effective business management, decision making, identifying growth opportunities, and building trust with investors, lenders, and suppliers. Analyzing financial statements allows a company to assess its financial strengths and weaknesses and make informed long-term and short-term plans.

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    1.

    1 Background of the Study

    Having accurate and organized financial statements can help run business more
    effectively and efficiently. Financial statements are a barometer of company’s
    success. Financial statements can include information on income, capital
    expenditures, cash flows, balance sheets, etc. Financial statements also let others
    know how well business is doing. If any company want to continue to growth and be
    successful balance sheet income statements and other reporting are an important part
    of the business process.

    Financial statements are all the proof that show the business on the right track. Proper
    and accurate financial data help to make important business decisions. It can also help
    to identify business opportunity for future growth. Accurate financial statements build
    trust. Investor, vendors, and lenders need to know that the company is successful and
    that they can confidently their hard-earn money into it. Financial statements are in
    order to help build trust in the business community.

    Financial statements help to expand the business. Potential clients, investors, and
    suppliers will want to see the track record before to do business with company.
    Regular financial reporting ensure corporate accounts have been settled and resolved
    well before need to report to the National Board of Revenue. Financial reporting
    planning can help the business to reduce unexpected error and mistakes.

    Financial statement may be defined as financial data about the economics activities of
    a certain business organization. The essence of financial statement is to aid
    management in decision making about day to day operations and long-term plan to
    supply money in the business or who have other interest in the business. The ideal
    financial statement therefore, is one that is relevant as far as problem solving is
    concerned, since management decisions which the financial statements aim at aiding
    and facilitating are basically in the nature of solutions to problems.
    Financial statements are written records that convey the business activities and the
    financial performance of a company. Financial statements provide information about
    the assets, liabilities, owned capital, profits and loss, cash flows of the enterprise.
    Financial statements are often audited by government agencies, accountants, firms,
    etc.to ensure accuracy and for tax, financing, or investing purposes.

    According to the Accounting Standards, financial statements are a structured financial


    presentation and transactions undertaken in an organization. The main financial
    statements are the means used by the accounting for the purpose of collecting,
    processing and presenting economic information. The purpose of financial statements
    is to provide information on the position and financial changes as a very important
    basis for making managerial decisions (Asllanaj, 2008). The objective of the financial
    statements is to provide information about the financial situation, financial
    performance and changes in an entity's financial position that are usable by a wide
    range of users in making their economic decisions (Lewis, &Pendrill, 2004). Financial
    statements and reports arising from their study provide information on:
    • Assets
    • Liabilities
    • Equity
    • Income and expenditures and
    • Cash Flow.

    Financial statements reflect the cumulative effects of all of management’s past


    decisions (Helfert, 2001). Financial statements are the business documents that
    companies use to report the results of their activities to various user groups, which can
    include managers, investors, creditors, and regulatory agencies. In turn, these parties
    use the reported information to make a variety of decisions, such as whether to invest
    in or loan money to the company (Charles, Walter & Thomas, 2012).
    The main financial statements are International Accounting Standards (IAS):
    • Income and expenditure statements,
    • Balance Sheet,
    • Cash Flow Statement,
    • Statement of Equity Changes,
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    • Statement of Explanatory Note.

    Financial statements are actually documents referring to the past. They present what
    has happened during a certain time period. However, people who study financial
    statements are interested in what will happen in the future. For example, shareholders
    are interested in knowing the future profits and dividends, creditors want to know
    about the enterprise’s ability of satisfying its liabilities, the administration is interested
    in knowing if the enterprise is able to finance its future expansion. Financial
    statements can provide valuable information concerning all these questions (Garrison
    et al. 2003:792). Financial Statement Analysis is a method of reviewing and analyzing
    a company‘s accounting reports (financial statements) in order to gauge its past,
    present or projected future performance. This process of reviewing the financial
    statements allows for better economic decision making. Financial statement analysis
    examines the relations of their economic elements they contain either in a given time
    (study of elements of a fiscal period), or diachronically (study of elements of two or
    more fiscal periods).

    Analysis of financial statements can identify the financial strengths and weaknesses of
    the firm by properly establishing the relationship between the items of balance sheet
    and profit and loss. It helps a firm to identify short term and long term growth
    forecasting. This analysis can be undertaken by management of the firm or by parties
    outside the namely, owner, creditors, investors. Financial statement analysis involves
    the re-organization of the entire financial data contained the financial statements. It is
    the establishment of significant relationships between the individual components of
    balance sheet and profit loss account. This is done through the application tools of
    financial analysis like ratio analysis, trend analysis, common size balance sheet and
    comparative balance sheet. This is used for determining the investment value of the
    business, credit rating and for testing efficiency of operation. Every company need to
    analyze financial statement to know the performance of a company and company take
    their decision and recovery procedure if need.

    The purpose of the financial analysis is to provide information to financial managers


    and analysts to make thorough decisions about their business. Assessing financial
    ii
    position and performance of an enterprise is a skill that every manager needs to have
    to make the best and right decisions for the company. The analysis of the financial
    statements is a method of comparing, judging or valuate situation of particular parts of
    balance sheet, on the basis of which important decisions are made. So, financial
    analysis is an analysis of balance sheets for the past, present and future of the
    enterprise. Balance sheet position values separately do not have high analytical
    significance, but if we compare them to the values of other balance sheet positions
    then their comparative value increases. Financial analysis is a study of the company's
    financial statements by analyzing the reports. Report analysis is a tool that easily
    calculates and interprets reports that are used by investors, creditors, enterprise
    executives and others.

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