Chapter 17 Analysis of Financial Statements Discussion Post

Chapter 17 - Analysis of Financial Statements: Discussion Posting

This module focuses on tools to help us analyze financial statements. We also describe comparative analysis and the application of ratios for financial analysis. Go into detail on the subject. Please use correct grammar.

1) Explain the purpose of financial statement analysis for both external and internal users.

Solution

The objective of Financial statement is to provide reliable and relevant information to the users in decision making process. The decision to be made will vary according to the class which the user is belongs to, for analysing that we need to consider each kind of users of financial statement.

While saying users they meant to be the stakeholders of the company, Stakeholder means the person or organisation which can be affect or be affected by the organization\'s actions, objectives and policies.And there are Three Type of Stakeholders, which are:Internal,External and Connected Stakeholders.

Internal Stakeholder

Those are the people within the entity who are currently committed to serve in organization.

Management

This is the Most important internal stakeholders who take startegic decisions and responsible for running the organisation. The Management Consider Financial statement usually for two concern For analysing Organisational Performance As well As their employement stake.

Management is concerned on financial statement as a tools for analyzing the organizational performance and taking appropriate measures to improve the company results.

Employees

Employees are the another kind of internal stakeholders they are the inevitable part of an organisation in day to day functioning of business.

They are concerened on he Financial Statement as to asses the company\'s profitability and its potential consequence on their future remuneration and how secure with this particular organisation at this instance.

Connected stakeholders

Thease are the people also called as primary stakeholders how are those with an economic or contractual relationship with the organisation.

Shareholders

Shareholders are the primary users of the financial statement who are concerned on the results as to analyzing the viability and profitability of their stake of investment in the company and determining any future course of action need to be taken in their investment portfolio.

suppliers

They are connected party with the organisation and have a economic stake in he company so as to get their payment on time for the supplies. They consider fiancial statement as an assessing tools to make a decision whether to offer further credit terms to the customer that is the oranisation in this case.

Customers

The type of customers concerened on finacial statement will be the customers who mostly relay on this organisation as their primary source of raw aterial or product that means the organisation as a supplier to those customers.

They will be looking for the future potential availability of goods or service from our organisation and finacial result sates on the going concern of the business.

Finance providers

  Financial Statements to decide on the providing of a loan or credit term to the organisation. Financial institutions assess the financial status of business to determine possibility of default of repayment. Also to decision for grnating loan based on the asset base of company as collateral and liquidity of company for repayment of interest and principal amount.

External Stakeholders

External or secondary stakeholders are the person or organisation who are not directly connected to the organisation.And those stakeholders will have an interest in the organisation\'s activities or may have an impact from it.

Governments

The Goverment generally means the Tax authority who are concerned on the taxable amount in the financal statement on hich the tax is paid. And this tax revenue is the main source of income for Government to spend for public\'s welfare.

Potential investor

The potential investors are use financial statement as the primary benchmark in assessing the company and to analyse whether company is worth to its market share price. There Financial statement as the signal of potentials of performance of company as compared to competitor.