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on Financial Information - Essay Example
Finance & Accounting
Pages 3 (753 words)
Financial information is very useful for managers and external stakeholder groups such as lenders, suppliers, governmental entities, and investors. The most important financial reports that companies publish on a trimester or yearly basis are the financial statements…
The managerial staff of a company is the stakeholder group that uses financial statements the most in their decision making process. Performing research regarding financial information can be very useful. Historical financial information can be used to determine patterns concerning the performance of a business enterprise. An accountant or manager can use historical data such as the sales numbers of an enterprise to investigate patterns. For instance the sales figures of the company during the past five years can reflect a downward or upward tendency. Based on that trend the manager can make decisions to change the strategies of the firm. Historical financial data can also be used to predict the future. Financial data can be inserted into statistical models such as regression analysis in order to obtain a forecast. Other research techniques such as the Delphi method can also be useful for forecasting purposes. Analysis of financial statements is essential for the decision making process of a company. Three techniques that managers can use to analyze financial statements are ratio analysis, vertical analysis, and horizontal analysis. Ratio analysis can be subdivided into five categories. The five categories of ratio analysis are liquidity, financial leverage, asset efficiency, profitability, and market value ratios. ...
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