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What 3 groups of people who will be interested in the financial statements of a sole trader?
The trader himself, tax man and the bank
Why the investor need financial statement?
Investors are the people who are interested to invest their money in any company so they reruires the financial statements to assess that which company is potentially capable to provide them higher return and does company has the potentiall to return back their invested money.
Why is it necessary to prepare the formal financial statements if all the data are on the adjusted trail balance?
Yes! The adjusted trial balance is the first step in preparing the financial statements. As that is done, completing the financial statements are relatively easy. The trial on it's own is difficult for people to understand.
Who are the Users of financial reports?
Almost everyone at some point will use or come in contact with some form of financial "report" or financial statement.To take a look at the personal aspect of it, open a bank statement, a bill of some sort, look at your tax form, these are all forms of financial reports.Looking on the business end of it many people use financial reports to determine the standing of a company, whether a small mom and pop business or a large corporation, financial reports are very important to the life of a business. Looking at the financial reports of a business can help determine how good (or bad) a business is doing. Investors, whether banks, private, or even stockholders, can determine if a business is worth the risk of investing into.Small business owners, managers and even CEO's of large Corporations use financial statements to determine where their business stands and how to proceed in the years to come. Can they afford to hire new employee's or do they need to cut back? Can they expand their business, how much can they spend on supplies, etc. They also use financial statements to for Tax Purposes.
Who are external users of a company's financial statements and why do they need information from this financial statements?
investors,state It is everyone! But more so, people who would like to make an informed decision (In terms of purchasing shares). Hence through the use of financial statements, managed by accounting standards and external government bodies they can ascertain whether a company is making a loss/profit etc and whether they should invest in the company or not. In short to protect members and manage public interest.
Why should business people understand business finance?
Business people should understand business finance because it provides the foundation for making informed decisions that drive profitability and growth. Knowledge of finance enables them to analyze financial statements, manage budgets, and assess investment opportunities effectively. Additionally, a solid grasp of financial principles helps in minimizing risks and optimizing resource allocation, ultimately contributing to the long-term success of the organization.
Identify the objective of financial reporting?
There are many objectives to financial reporting. The following are just some of the many:Tax minimization - a privately owned business who doesn't necessarily care about the net income computed on their income statement would have the goal to minimize tax. Since their general purpose financial statements are filed with their tax return, they would want to minimize the amount of tax. (Thus their objective is to get their financial statements to show a low income to minimize the tax they pay.)Stewardship - Shareholders or stock holders who have invested in the business are not involved in the day to day operations of the business; thus they do not know how the business is doing, so they turn to the financial statement to assess the business standing.Management evaluation - Stakeholders often want to evaluate the performance of the people managing the business and does so by looking at the financial statement. Some manager's bonus are reflective of the financial statements as well.Performance evaluation - Similar to management evaluation, but in a broad sense, (potential) stakeholders want to evaluate the overall performance of the business to see if they should invest in the business or not.Cashflow prediction - Creditors will be interested in knowing if they should lend the business money. It helps them to estimate whether the business will be able to pay back the interest and principal on the loan. Also shareholders will be able to evaluate if the business will be able to pay out dividends.Monitoring contract compliance - Some terms and conditions of banks limit the actions that management can take often by financial statement numbers. For example the business may have to maintain a certain current ration, not pay over a certain amount in dividends, or not take out more loans.
What does financial services do?
Financial services are provided by the finance industry to provide economic help to customers. They allow people to analyze their financial statements, save, invest, or take out loans.
Differentiate accounting and bookkeeping?
Accounting is a broader term of book-keeping. Book-keeping helps in the day to day operations and for preparing financial statements of an enterprise. Accounting relates to the internal control of the business, detecting errors in recording entries and gives financial reports of the values and performance of the business to the management and to other people like the shareholders.
What amounts are reported on pro forma statements and how this information is useful to financial statement readers.?
Pro-Forma financial statements are forecasted statements where the issuer tries to predict levels of operations and the resulting income or loss. The users are usually specific people / banks, etc that want to know what the issuer's goals are to see if they want to commit to engage in a transaction now, based on circumstances that the issuer is predicting. IE: If bank lends a business money on to expand or build a new facility will the increase in production generate enough income to service the debt. Pro-Forma statements will let the bank assess whether the business is realistic in it's goals and assumptions, and whether the business will eb able to afford the new loan.
What is Jay-Z's mission statement?
Generally, people don't have mission statements. Business dose.
Who are the people interested in finding new business opportunities and new ways to make profits?
Entrepreneurs, were interested in finding new business oppertunities and new ways to make profits.
