FINANCIAL INFORMATION

Financial Information



Financial Information

Introduction to the purpose of the paper

This paper focuses on the importance of financial statements and the information they provide to its users. there are various users of the financial information that include the managers of different departments within the organization. Some external stakeholders also use financial information for various purposes. These users include creditors, debtors and shareholders as well.

Literature Review

Financial Statements

Financial statement is a statement that provides valuable source of information for business managers and all who work within the business, also for potential investors and their business. The financial assets of a business merely represent claims on real estate and also the financial asset play a very crucial role in developed economy( mai grow hill 2008 investment) This includes an income statement a balance sheet and cash flow statements. They are usually compiled on a quarterly and annual basis. Therefore the general purpose of a financial statement is aimed to meet the need of a wide range of users.

The financial statement explains the financial position of an organization and normally the owners, managers, investors, bank, and the government are the main people interested in a business financial statement. They are likely to be various users grouping with an interest in organization in the sense of needing to make decision about the organization.

The income statement, also labeled the statement of operations measures a company's performance a specified period of lime. It is frequently called “profit and loss account”. For this reason the statement is titled for a period of time for example, year ending May XX, 20XX. The statement is different from the balance sheet because it is a cumulative record of activity for a month, quarter, multiple quarters, or for one year.

Creditors, investors, and many others use the income statement as a measuring stick of how a company has performed, where it appears to be heading, and what its future cash flows will be. The financial statements are used to extract the information that the company can later make use of for showing into public (Brandstedter, 2003, p. 50).

The financial statements have several purposes and can be used by many individuals. These include the government authorities, courts, other financial institutions, competitors, employees and the investors. The forecast of the financial statements are drawn and utilized by the lending institutions, management and the security analysts (Brenner & Shuey, 2002, p. 200).

According to the Foster (1986), there have been classified two schemes associated with the forecasting approach. These are the Mechanical approach versus Non Mechanical approach. The process of forecasting of the financial statement in the mechanical approach is that the inputs of the data are pooled in a predominant manner that the results made through the forecasting technique will always be similar to the database and the model that were chosen for the forecasting.

The second approach that is used for forecasting the financial statements is the Univariate model versus Multivariate. In the Univariate model, there is taken only one variable for forecasting the ...