Read each passage – 2 total
Reply back to both 150 words each APA format related to headings, citations, and reference list. Your replies should be supported by references to at least 2 sources, which may include professional, scholarly, or trade publications, or the course textbook or Bible.
FINANCIAL STATEMENT ANALYSIS:
When a company's financial statements are examined for decision-making purposes, this is known as financial statement analysis. It is used by external stakeholders to understand an organization's overall health and to assess its financial performance and business value. Among these are the income statement, the balance sheet, the cash flow statement, the notes to accounts, and the statement of changes in equity.
FINANCIAL STATEMENT ANALYSIS IS AN IMPORTANT AREA OF STUDY:
Analysis of an important topic of research in the financial statement as follows:
1. The financial statements analysis gives information about the company's financial status and performance. It assists the management to plan and decide on the company's future policies. Analysis helps to determine the company's profitability and operational performance.
2. The historical performance is studied to determine the future possibilities of the company. A review of historical sales trends, profitability, cash flows, return on investment, debt-to-equity structure, and operating expenses, etc. is examining past performance.
3. Financial analysis enables financial organizations, borrowing agencies, and banks to determine whether or not a firm loan may be issued. It helps them to identify the credit risk, to determine the terms and terms of a loan if approved, rate of interest, maturity date, etc.
4. The management deals with the company's future prospects. The financial analysis assists them to evaluate investment choices to assess the company's profit potential. The assessment and prediction of bankruptcy and likelihood of business failure can be done with the use of financial state analysis.
LEARNING FROM THE PROCESS OF FINANCIAL STATEMENT ANALYSIS:
The biggest benefit of the study of financial statements is that it gives investors an idea to decide whether to invest their assets in a specific company. The financial statement analysis also benefits from enacting the company's compliance with the relevant accounting standards by regulatory bodies like IASB. The study of the financial statements is useful in analyzing the tax due to the company by government bodies. Over a certain time period, the corporation might examine its own performance.
BIBLICAL IMPLICATIONS OF RELIABLE AND REPRESENTATIONALLY FAITHFUL FINANCIAL STATEMENTS:
The Bible gives very little advice about how to compile financial reports or how to set up an accounting system. The Bible discusses why reports should be financed. The Bible states, in particular, that financial accounting is needed to prevent fraud, oversee agents, and minimize resource conflicts. Today, of course, we emphasize that accounting is available to inform investors. In Biblical times, the economy did not have spread property requiring this accountability.
Access your bible from anywhere. BibleGateway.com: A searchable online Bible in over 150 versions and 50 languages. (n.d.). https://www.biblegateway.com/.
Cioca, I. C. (n.d.). THE IMPORTANCE OF FINANCIAL STATEMENTS IN THE DECISION-MAKING PROCESS.
Faccia, A., Mosco, D. (2019). Understanding the Nature of Accounts Using Comprehensive Tools to Understand Financial Statements. Financial Markets, Institutions and Risks, 3(3), 18-27. http://doi.org/10.21272/fmir.3(3).18-27.2019.
Revsine, L. (2021). Financial Reporting & Analysis (8th ed.). McGraw-Hill Education.
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A crucial element of running a successful enterprise is communication. This includes internal communications, communications with outside entities (i.e. banks, auditors, etc.), and communication to the shareholders – or investors – and consumers. Developing and releasing an accurate financial statement is a necessary step to keep open communication in good faith. Financial statements can show information about the company, its historical performance, the current state of the business, as well as future prospects. Financial statement analysis is use as a tool to see the current state of the entity, a tracker on how productive management is, an early warning to investors, a predication tool for the future, and a measure of accountability. A proper analysis of financial statements will use four specific tools – cause-of-change analysis, common-size statements, trend statements, and financial ratios – to examine potential profitability of the business’ ventures and their credit risk (Revsine, Lawrence, et al., 2021).
Financial statement analysis is an important area of study for anyone wanting to go into the business or finance realms of industry because they would need to know exactly how to “read” and interpret what is put out from a company. Many financial statements are length and must be properly analyzed by the partner side and consumer/investor side to make the best decision with regards to investing and cooperation. Also, as stated by M.R. Kumara Swany, proper financial statement analysis should be (at least for the Christian business person or investor) base on ethical values. The world is rampant with deception and corruption, so being able to properly analyze a financial state – to include being able to recognize discrepancies – is crucial (2012). Proverbs 13:11 teaches us that, “Dishonest money dwindles away…” This is one of many scriptural references that guides Christ followers to conduct business in an honest and moral way.
Entwistle makes a very applicable distinction where he compared financial accounting to financial statement analysis. In financial accounting, there are plenty of strict and rigid rules and guidelines. Yet, for financial statement analysis, there is no standard or formality (2015). This lends even further to the point that financial statement analysis is something needs to be studied and learned by individuals wanting to invest or be in a business career. Proverbs 21:5 teaches us that, “The plans of the diligent lead to profit as surely as haste leads to poverty.” Proper planning requires proper knowledge. Learning to correctly and efficiently analyze financial statements will enable an investor to make proper plans and moral decisions.
Entwistle, G. (2015). Reflections on Teaching Financial Statement Analysis. Accounting Education, 24(6), 555–558. https://doi.org/10.1080/09639284.2015.1075314
New International Version. (2011). BibleGateway.com. http://www.biblegateway.com/versions/New-International-Version-NIV-Bible/
Revsine, L., Collins, D. W., Bruce, W. B., Mittelstaedt, H. F., & Soffer, L. C. (2021). Financial Reporting & Analysis (8th ed.). McGraw-Hill Education.
Swamy, M.R. Kumara. "Ethic–based management vs corporate misgovernance–new approach to financial statement analysis." Journal of Financial Management & Analysis 25.2 (2012): 29+. Business Insights: Global.
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