The use of APA style format must be used for completing the project. Paper must
ID: 2567968 • Letter: T
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The use of APA style format must be used for completing the project. Paper must be 12 font an double-spaced. The final paper should be ten pages -graphs and exhibits do not count as pages Since most ideas are not original, they must be cited in the body of the work, and referenced on separate page at the end of the work (please see short sample paper at the end of this document Scenario The board of directors of the three respective companies have been replaced. As prospective financial accountants you have been elected to form a team that will review certain key areas of the company assigned to your team. For the respective company assigned, you are responsible for establishing if there are any 'going concerns' with the company. Each team will establish this by reviewing (1) Managements letter to Shareholders, (2) the independent auditors report, and (3) and compiling key ratios from the financial statements for the past five years. In other words, you have been charged to provide information to the new board of directors as it relates to overall company performance and solvency For each company assigned, review the annual financial report (10-K) and provide in essay format the following: 1. The purpose of financial statements a. Who are the users of this information? b. What is the common goal of all users of financial statements 2. Identify the four financial statements that are the building blocks of financial analysis 3. Identify the industry in which the company being analyzed operates, and determine explain the importance of each.Explanation / Answer
1. a. Users and purpose of financial statement.
There are many users of financial statements. Broadly users may be classified under 2 categories i.e. Internal Users and External Users. Internal users generally refer to the management of the company who involve in day to day operation of the business. and all other users are generally classified under external users. These users are not invloved in the operation of the company. However, they may have some financial interest or may be for some any other reason, they use financial statement. These external users include investors or owners, Suppliers, Lender or financial institution, Customers, Government, Employees, Suppliers, General Public. Main purpose of these users are as follows.
i. Company Management: Management use the financial statemnt to have a better understanding of financial positions and profitablity of the organisation. So that managmement can take necessary decision making for the business.
ii. Investors/ owner: Investors and owners use the financial statement to understand the risk and profitablity of the organisation. It will helpful to analyse and make the investment decision i.e. whether to buy, sell or hold.
iii. Lenders or financial institution: Lenders and financial institutions who lend funds to the organisation use financial statements to understand the repayment capabilties (solvency) of the organisations.
iv. Customers: When customers and organisations have long term involvement for their business. So customers use the financial statement to understand the long term existence of the organisation and stability of operations.
v. Governments: Government use financial statement to understand the profitability and tax due thereon.
vi. Employees: Employees are interested in company's profitability as they obtain salary and also their carrer is depend on the company's expansion. Employees are interested in financial statement to understand its stability and expansion.
vii. Suppliers: Suppliers generally supply materials to organisations under credit and they collect dues after a certain period. If organisations doesn't have ability to repay the debt to supplier, then supplier wouldn't provide material in credit. So supplier use the financial statement to understand the creditibility of the organisation.
viii. General Public: Apart from above mentioned users, general public also use the financial statement. General public includes credit rating agencies, research analysts etc.
b. Common goal of all user:
Common goal of all users is to understand the organisations profitablity, creditabality, liquidity and financial positions. Different users have different interest in the financial statement but after all the main goal to use financial statement is to understand whether the organisation is a going concern and abilty to expand its activities and contribute for a better society.
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