Aix College of the University of Phoenix
Financial Statements are an important factor to have a successful business. The ability
Analyze financial statements is crucial to determine an organizations financial health. “It is a fact that the consequences of all important management decisions, financial and otherwise, are immediately and/or eventually will be reflected in the financial performance of the business enterprise” (Kepner & Wysocki, 2009). In the past reporting the finances of a company was much simpler to report. There were fewer bits of information to process, and they didn’t have a way of telling which financial statement would be useful for the company (McClean, 2003). “Today, financial analysts know that, when practiced well, good management can lead to a variety of ratio values, not to a single magic number. There is also a large body of research demonstrating what information is useful and how to calculate it” (McClean, 2003). Let’s take a closer look at the process of using financial statements, the basic functions, limitations and other aspects of why it is so beneficial in determining the health of an organization.
Financial Statement can be used internally and externally; when using them internally the managers and employees sometimes use them for their own information. For example, the managers may use it to plan and set goals for the upcoming periods. The managers can compare their financial statements with those that have been published and those of other enterprises. The comparison can be for macroeconomical dates, forecasts, market, and industry that the company operates in (HubPages, 2009). Take for example, managers of a Physicians’ Clinic would use the information that the financial statement provides to answer the following questions: “How are they doing?, what is their rate of profit?, and are they managing their inventories and accounts receivable as efficiently as they... [continues]
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"Financial Management." StudyMode.com. 05, 2010. Accessed 05, 2010. http://www.studymode.com/essays/Financial-Management-333514.html.