So who is affected by finance? Shareholders, as stated earlier, are the focal point in publicly traded companies. They are not the solitary people who reflect about financials, however. The CEO, CFO and any other "C" position have liability to report to the board about the financial presentation of the company. Management is accountable for creating and upholding both capital and operational budgets. Employees are vital to maintain specific standards of productivity. Customers are affected by finances as well. Think about gas prices, and how increased costs in production are approved on to the consumer.
When you look at a company's finances, there are fundamentally four items to consider: the income statement, the price earnings ratio, the balance sheet, and the statement of cash flows. The income statement is an instrument u...
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...l information may be reported inaccurately or fallacious as in the case of Enron and WorldCom. The Sarbanes-Oxley act was shaped to help eliminate the hazard of individuals with power from covering up financial information to make private gains.
To wrap up, it is imperative to consider all the major people involved when making financial decisions or reviewing financial performance. There are three necessary documents used in financial reporting: the income sheet, the balance sheet and the statement of cash flow, which are all part of the Statement of Financial Accounting Standards. More in depth analysis can be performed with formulas like the DuPont Analysis. Lastly, many essential decisions are made based on financial data. It is significant to guarantee ethical handling of potentially destructive information, whether it is cooperative or damaging to any party.
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