Financial Reporting in the Face of Accounting Scandals Essay

Financial Reporting in the Face of Accounting Scandals - Essay Example The job of financial reporting is to give an overview of the short and long term financial position of a company. This is done by producing the Balance sheet, which provides a picture of the company at a point in time, the Income Statement which gives an account of the business's performance during the year in terms of revenues and expenses, the Cash flow Statement which presents the cash inflows and outflows fro the company divided into operating, investing and financing activities and finally the statement of changes in equity which basically explains the change in a retained earnings of the company during the financial year (Graham 2005). These four statements are aided in understanding by notes to the financial statements which provide additional and in depth information about specific items mentioned in the four statements. Accurate and transparent financial reporting of a company's accounts is significantly important in this age of massive investments. The four statements listed above provide information to the investors in making important investment decisions and to lenders regarding credit decisions (Piotroski 2000). This is done based on the position of the company presented in the financial statements which allows investors to judge whether the company is profitable and whether they would be able to get a significant return on their investments with this company. Creditors similarly can judge the ability of the company to pay off its debt in the future and whether they will be able to receive their money back with the interest payments. These statements are also utilized for assessing the cash flow prospects of the company as well with the same purpose in mind, to benefit investors and creditors. Cash flow projections are very important for decision making as cash inflows and outflows are ultimat ely the most important things in terms of a company's ability to payoff investors and creditors. Without this liquidity, there would be little to payoff with (Kaplan 1995). Furthermore, financial reporting gives information about the ownership of assets of the company and its related liabilities which allows users of the statements to assess what the company holds and how it is performing in general. It is also an indicator of the management's performance during a fiscal year, allowing shareholders to judge whether the current crop of management and the Board of Directors is doing a good job handling their investment (Kaplan 1995). As such, the existing shareholders of the company need financial reporting to assess whether their investments are worthwhile. Prospective investors can utilize them to judge whether the company presents a better investment option compared to others in the industry and in general. The all important tax collections that government authorities perform are b ased on the financial statements of the companies which make them important for the Government (Watts 2003). Even the employees of the company, who are organized in the form of labor unions in many countries, use the financial statements to assess the company's performance and negotiate for compensation and promotion with the management. Financial analysts and those on the

Entrepreneur Project Part II Research Paper Example | Topics and Well Written Essays - 1750 words

Entrepreneur Project Part II - Research Paper Example (Longley, 2004). This shows that a large percentage of US population will comprise of people above the age of 65. The idea of starting this project was to enter into a business that has not been fully ventured into by different organizations. Our research into the idea showed that not many organizations are providing all the services and home-like environment in adults care centres. That is why it is a great opportunity to enter into the business and take advantage of the financial benefits that it provides. The vision statement therefore refers to being the most sought-after organization in adult care, among the families of the old age people and the old age people themselves. By providing different services like physical and mental health care, personalized care, providing equipment for people with disabilities, teaching home-based care, and providing home like environment and networking with other elder people can make our organization reach high demand among the targeted population. The vision aims to be the best at what we are going to provide. The organization will not be any small sized adult day care centre. It aims to provide a variety of services to the old people so that they are comfortable, are taken care of, and feel like they are at home. President: The president of the organization is the top head of the organization. S/he belongs to the upper most tier of the organization. The president will deal with all the highly strategic decision making process. The president does not go into the details of the minute things happening in the business. S/he will just guide the department heads and CEO with the overall running of the business. Only extremely important and major decisions will be finalized under his/her leadership. For example a decision to open the business in a new country will need the consent of President. Therefore President will be the leader of the entire organization and its