ANALYSIS OF FINANCIAL REPORTING AS A SOURCE OF INFORMATION
|BANKING AND FINANCE|
No of pages
|MS Word & PDF|
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An accounting report consist of items that are contained in the annual report of a company.
These reports are also termed “financial statement” these reports are necessary and compulsory in any business organizations and they show the true and firm position of such company at a given period of time.
They are usually on annual basis and they provide information to the user of the report to give an informed judgment about a company.
These analysis of financial report include:
(a) The profit and loss account which shows the profit for a year before and after take and a profit to be retained
(b) The balance sheet which shows the statement of asset and liabilities
(c) Statement of sources and application of funds
(d) Auditor’s report
(e) Director’s report
(f) A value added statement
The management cannot only direct the affairs of the company but also by the shareholders.
And in order to measure the performance of a business entity, the management need this accounting report.
Statement can be prepared to indicate either the historical result of these transactions or the financial conclusion of the business and interpreting the result therefore to the interested parties”
Public company as it will be used throughout this study refers to as public limited liabilities whose shares are quoted in the stock exchange market, various groups such as owners, creditors, managers, government agencies, employees etc. are interested in the ability of the company to pay its debt as at when due and to earn a reasonable amount of income.
These ideal concepts or objectives of a company are referred to as factors of solvency and profitability.
A company which fails to meet the standard expected of it by its creditors in a timely basis is likely to experience difficulties in obtaining credit which eventually lead to deadline in its profitability.
Similarly, a company whose earning is lower than those of its competitors is likely to beat a disadvantage in obtaining new capital from stock holders.
Therefore, accounting reports are of great importance to any company.
1.2 STATEMENT OF THE PROBLEM
This study is specifically undertaken to examine the contributions and usefulness of various accounting reports to a public company.
It should be noted that information provided by the various accounting report sometimes might not be accurate thereby causing a set back in it ability to give an informed judgment to it hence the interpretation to this accounting reports in other to show the liquidity position of a company and how solvent it is therefore, it shall examine.
i. Whether accounting reports are eventually useful to public company
ii. Whether the user can actually give various interpretations to eat and deduce and informed judgment from it.
iii. Whether the information provided is constant
iv. Whether the tools used in analysis actually give good result
1.3 PURPOSE OF THE STUDY
In the early history, it is popularly believed that the primary purpose of financial reporting was to detect errors, but with the development of the new intellect about the primary objective financial statement or reporting.
The purpose is to give report which includes the following:
(a) THE APPRAISAL OF PAST PERFORMANCE: The decision maker will access the success of the business and the effectiveness of the management by looking at the information such as sale volume cash flow.
(b) PREDICTION OF FUTURE POTENTIALS: This involves the provision of information which will provide effective decision making by the future of an enterprise and suggest the necessary solution for the firm or enterprises to respond to any future economic changes or development.
(c) EVALUATION OF PRESENT CONDITION: The decision makers will require information such as asset owned by the enterprises; equity ratio etc. in general, financial statements are prepared for the purpose of presenting a periodical report of progress made by the management.
The financial statement and their adherence to general accepted accounting principles and conventions.
1.4 SIGNIFICANCE OF THE STUDY
The financial procedure is very significant in as much as its attempt to achieve these objectives.
1. To provide other needed information about changes in economic obligations
2. to provide reliable information about changes in non-resources of an enterprise that result from profit oriented activities.
3. its objectives are to provide reliable financial information and economic resources and obligation of business enterprises
4. it provides financial information that assist in estimating the earning potentials of the enterprises
5. to assist management in decision making from the above significance of financial statements, it can be deduce from that it has three main significances.
From the above significance of financial statements, it can be deduced from that it has three main significance.
(a) To ensure that directors properly managed the asset of the company (steward functions)
(b) To know the present financial position of the company
(c) To know the future prospect of the company, it ability to employ, pay dividend and to repay loan.
1.5 RESEARCH AIM AND OBJECTIVE
In order to give this research work some degree of validity, the following questions were formulated.
i. TO establish whether the procedure can reduce the degree of errors
ii. To investigate the usefulness of financial reporting as a means of information in an organization
iii. To ascertain the practice of standard an means of information
iv. To establish whether the introduction of financial reporting aids to detect all kinds of fraud in the financial statement of an organization
v. Finally to find out the standard and importance of financial reporting