For this part of the assessment, you will prepare a financial analysis paper add
ID: 2481009 • Letter: F
Question
For this part of the assessment, you will prepare a financial analysis paper addressing various topics about your chosen company, supporting your answers and claims with quantitative data where applicable. You will need to research your chosen company and obtain its latest audited financial statements (information that is available to the public online) in order to answer the following: A. Explain how the conceptual framework and accounting standards apply to your company. B. Analyze the information within the disclosure statements for information that would interest the creditors of your company. i. What information would be important for someone in this role? ii. Why would this information be important to them? C. Analyze the information within the disclosure statements for information that would interest the investors of your company. i. What information would be important for someone in this role? ii. Why would this information be important to them?
Explanation / Answer
A)
Conceptual framework identifies and defines the qualitative characteristics of financial statement. The framework is about principles, rules of recognition and measurement of the type of information which has to be displayed in the financial statement.
The company I have chosen has followed GAAP Accounting standards for presenting the information in the financial statement. The financial statement should reflect the reliability, relevance and material information about the company.
B)
The creditors of the company will be benefited by the financial information of the company like debt equity ratio, sales turnover ratio, cash flow statement, net profit ratio etc. which is disclosed in the disclosure statement for information.
The quality of assets, the ratio of sales turnover ratio shows the time at which the inventory can be sold by the company. Provision for bad and doubtful debts on accounts receivables, debt equity ratio shows the proportion of debt on equity. The company having low debt equity ratio can take more loans but the company having high debt equity ratio means the company will be in risk if it takes more loans.
The ratio of interest covers profit before interest and tax. The profitability ratio like gross profit ratio and net profit ratio shows the profits of the company to repay back the loans.
On the basis of all these information the creditor can be able to assess the risk of giving loans to the company and judge whether the loan can be given to the company or not.
C.
The information regarding profitability of the company, sales, dividend payout ratio, inventory turnover ratio, debt equity ratio are the ratios which are important for investors of the company.
The profitability ratio shows the growth of the company, the sales ratio shows the liquidity of the company. When the company is in growing condition the investor will also be benefited with that. Debt equity ratio shows the ratio of debt over equity means the liability of the company which is important for the investors to judge the financial condition of the company.
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