The Usefulness of Financial Statements Essay -- GCSE Business Marketin

The Usefulness of monetary StatementsThe primary means of communicating the pecuniary personal effects of organizational activities and transactions of a company to outsiders is the financial insurance coverage system. This reporting system includes communicating financial information through yearbook financial statements, as well as through reports filed with the Securities and Exchange Commission, voluntary forecasts, and separate financial and nonfinancial releases. monetary statements are the main source of financial information conveyed to parties external to the company. The full set of primary financial statements consists of a balance sheet, income statement, and statement of cash flows. External financial statements have a general purpose and are designed to meet the needs of investors, creditors, and other(a) users of the external reports. They are historical in that they communicate activities and events that have already occurred. pecuniary statements are p repared on an accrual basis they sum of money the impact of events and transactions when they occur and not simply when the cash consequences of such(prenominal) events and transactions are realized. Financial statements are effective in evaluating an enterprises profitability, liquidity, and long solvency and equity structure. An analysis is conducted from the perspective of external users of financial statements and it relies on the annual report of a corporation and other publicly available information. Management, of course, withal has access to extensive internal financial data, and their concerns extend to subdivisions of the enterprise, such as the surgery of subsidiaries, divisions, departments, and operating functions. External reports are intended primarily for stockholders, creditors, directors, and regulators such as the SEC. Although externally reported information is also useful to incorporate instruction at the highest level, it is far too aggregate to b e useful for decision making by lower levels of management. And even top levels of management need financial information for decision making with respect to the performance of the several(a) components or segments of the enterprise.It is vital that managers understand how their corporation organizes itself and at what levels the various functions such as manufacturing, marketing, finance, and research and development are performed. Managers ... ...d profits. It is seldom likely to form a judgment about the performance of an individual segment or division by inspecting the records of only that segment or division. on the whole financial information must be analyzed together to serve well useful in and out of a corporate entity.Works CitedFinancial Accounting Standards Board, 1978, Statement of Financial Accounting Concepts No.1 Objectives of Financial Reporting by military control Enterprises (Stamford, CT., Financial Accounting Standards Board).Financial Accounting Stand ards Boards, 1984. Statement of Financial Accounting Concepts No. Recognition and Measurement in Financial Statements of Business Enterprises (Stamford, CT. Financial Accounting Standards). American Accounting Association, 1957. Accounting and Reporting Standards for fellowship Financial Statements and Preceding Statements and Supplements (Iowa City, Iowa American Accounting Association). Parker, R.H., 1979. Evolution of Corporation Financial Reporting (Nigeria, Africa Thomas Nelson and Sons Limited).Gray, S.J., 1984. Information Disclosure and the Multinational Corporation ( cutting York, New York John Wiley and Sons).