Introduction An important part of financial planning for corporations is the annual report. Publically held companies are required to submit an annual report to the SEC and private companies, even though not required, can use an annual report to gauge the performance of the company for the past year and use the report to plan for the future. The financial statements that make up an annual report are the income statement, the balance sheet, and the statement of cash flows. (Melicher, 2014) Once all of the financial information has been compiled and the three statements that make up the annual report have been completed a corporation can then start to analyze the data. There are several different categories of financial ratios
Reports can be issued for the whole company, group of departments or single department. Used information time frame Information usually collected from the history of the company. Usually present information is used. Aim To figure out how business is doing financially and to calculate profit/loss annually Information usually used to forecast for the future, present problem solving. Information also used to evaluate, control and decision making.
According to McGuigan, Moyer & Harris (2014) short run is A firm within a “competitive industry may break even or operate at a temporary loss in the short run” (p.352). On the other hand, long run consist of a competitive market and cost will be equal to price, and profits will be eliminated. The company can use this data for price and begin to change the maximum price. If the price is not the maximum price, the company should take required steps to reduce the price to make them consumer friendly. The company, in the long run, can expect sales increase if their prices (McGuigan, Moyer & Harris, 2014, p.352).
More production will lead more fixed manufacturing overhead costs go to absorption costing inventory and less expensed during a period therefore there will be more profit. In reality, the company may not able to produce that much and managers want to earn more commission based on the performance of the operating income, so they just buildup the inventory and it ignores to account for expenses related to carrying the additional inventory in order to earn more profit. Therefore, the profit should consider as a phantom profit. According to Managerial Accounting textbook, it indicates break-even point analysis under absorption costing method request both production and sales to analyze it. If company manipulated the inventory such as increase the inventory artificially or seduce dealer to stock more product than the amount that the markets actually demand, the company will have illusory profit.
The Securities and Exchange Commission requires that publicly owned businesses provide annual reports, which are available to the public. Many different people use annual reports, to make informed business decisions. Management from the company uses the information to determine a number of items. Some of these items are the profitability of the company, the inventory turnover rate, and the accounts receivables rate. Creditors use the annual report to determine how well a company can satisfy its current liabilities, as well as, how the company is doing in the aspect of long tem survival.
When CFOs communicate with each other they speak in measurements. Think about it… during all those quarterly analyst calls you hear all kinds of stuff about cash flow estimates, earnings per share, return on ... ... middle of paper ... ...ur performance in a quantifiable term. I believe that with this specific concrete measurement for procurement, companies can streamline ROI, benchmark their performance and communicate in a language that C level peers can understand. And when you look deeper into their overarching solution you really get more than just a simple calculation. They say by organizing the important elements of an operation you’ll be able to set and track annual goals, giving your executives a better visibility of what needs to be accomplished and what their level of engagement should be and how they can add value.
I have taken M/S Bucher Industries AG’s annual reports from 2009 to 2013 to analyze the organization standing in terms of financials. Detailed analysis of financials including their statement, Ratios, Dividends etc. has been carried out to understand the financial position of the Bucher Industries. The analysis and summary of this report will be useful for ease of decision making in investment/ expansion/ dilution and for the financial planning of upcoming years to the management. 2... ... middle of paper ... ...lysis-putting-the-numbers-to-work.
Scottish Power Using examples from the annual report, explain how Companies Act legislation and other regulations influence the information contained therein. It is important for a business to create and maintain accurate financial records and to know about the different users of financial information. Every business has to meet internal and external reporting requirements to show its financial health and to meet legal and other requirements. The reasons why businesses therefore keep accurate records are: · Assessing its financial position - businesses assess their financial position every year so they know the business is making efficient use of resources to provide the necessary financial return to achieve a profit or suffered a loss. Businesses can find out if it as the ability to generate cash to ensure continued trading and to make dividend payments.
The finance function also generally sets out budgets for the other departments early in the financial year and it insists on the other functions to stick to them. The financial function wants pricing to cover the organization’s costs and contribute towards its profits (Brassington & Pettitt 2007: 17-18). The financial sector must abide to corporate responsibility and ethical obligations when recording the firm’s financial health in regards to the financial reports given out to investors and the public in the end of the fiscal year.
Published financial information is issued to meet the needs and demands of their users. These range from Shareholders who will check on what direction the company is heading, whether it has achieved healthy profits, that it's solvent, the value of the company and possible signs of failure. Other users are the employees, who will want to check the statements to see whether their jobs are safe and see if possible, whether there could be wage and pension increases. This report offers information on operating results and financial conditions of companies to stakeholders as well as to shareholders. Any fraudulent financial reporting of a company like Enron for example would have a widespread and severe impact on employees, business acquaintances, investors as well as stakeholders and shareholders if the company went bankrupt.