Unit 14 Advanced Management Accounting Assignment Help - Higher National Diploma in Business (Level 5)

FAST CARS REPORT
 
CONTENTS

INTRODUCTION
REVIEW OF FINANCIAL STATEMENTS
IMPORTANCE OF FINANCIAL STATEMENTS TO STAKEHOLDERS
CONCLUSION
BIBLIOGRAPHY

INTRODUCTION
Analysis of financial statements is an extremely important task that is undertaken by the financial department of the company including the auditor. The purpose of analyzing the financial statements is to evaluate the past and existing financial data of the organization and according assess the performance of the entity in terms of estimated risks and returns. It reflects major details about the organization's potential to generate revenue, establish certain trends as opposed to the industry, its profitability margins and its strengths and weaknesses.

Financial analysis means carefully assessing the financial statements of the organization and then drawing conclusion there from. It includes the income statement, cash flow statement, balance sheet and notes to the above financial statements. It is also accompanied with the auditor's report that conforms whether the financial statements have been prepared in accordance with the generally accepted auditing standards. The report also concludes on how fairly the financial statements reflect the true position of the company. (Khot, 2016)
REVIEW OF FINANCIAL STATEMENTS

IMPORTANCE OF FINANCIAL STATEMENTS TO STAKEHOLDERS
Financial statements play an extensive role in providing relevant information to the users of such information. The users are generally termed as the stakeholders of the organization. They are the ones who are likely to get affected by the organization and its activities on the whole whether directly or indirectly. It provides utility for satisfaction of the varied interests of certain parties like the following:

1. INVESTORS: the investors are persons who the owners of the organization. They invest their funds into the company. They cannot participate in the day to day activities of the organization directly. Hence, it becomes imperative for them to be aware of ongoing operations within the organization. The information is thus reported to them through the preparation and presentation of financial statements. The shareholders of Fast cars are interested to know what profits the organization is making and whether its operations are stable enough to survive and commence with its expansion projects. The statements presented above reflect the degree of efficiency and effectiveness of the ongoing processes and thus make relevant decisions about future prospects. (Biery, 2013)

2. SUPPLIERS: the financial report is an important guidance to the lenders as well. Through deep rooted analysis of the business situation and financial performance of the organization, the lenders both current and prospective, become aware of its liquidity and profitability ratios. They come to know about the current payment policy adopted by the organization and its sound financial status. Since the balance sheet of Fats Cars shows an account of creditors, i.e., accounts payables; it is clear the company adopts a policy of credit purchases which is repaid within twelve months. (kumaran, 2015)

3. MANAGEMENT: the management team of any financial entity requires updated information about the operations and relevant requirements of the organization to ensure their duties are discharged with full responsibility and complete specifications. According to the results of the financial position of the entity, the management is able to formulate necessary policies and developments for its betterment and growth. Through the presentation of financial statements, the management is able to work for the organization and its stakeholders in a diligent manner with utmost professionalism undertaken necessary steps for the same.

4. GOVERNMENT: any organization is attracted to pay taxes and certain penalties in case of nay breach to the rules and regulations made to the law presently in enforcement.

5. EMPLOYEES: employees are another important section in the stakeholder group that uses financial information as a safeguard tool for their ongoing employment status and negotiation. Their bonus largely depends upon the quantum of profits the organization is likely to have made. The balance reflects wages payables with a considerable amount. This means that Fast cars have not fully paid their employees with their wages. (Quyen, 2011)

6. SOCIETY: any organization that works for their profit making objective is likely to affect the society and the national economy at large. With the kind of industry Fast cars operates in, it is likely to generate pollution in the form harmful gas emissions and waste products. Thus, environment gets affected if the company fails to undertake sustainable measures for the protection of the society and its local community

CONCLUSION
The analysis of financial statements is thus important to every stakeholder of the company and adds to their value either directly or indirectly. Though the responsibility of its preparation lie on the shoulders of the management, its authenticity is generally checked by the auditor appointed by the organization.