FINANCIAL REPORTING

Financial Reporting on the Internet - AMETEK, Inc.

Financial Reporting on the Internet - AMETEK, Inc.

Q. 1 - Responsibility to Prepare Financial Statements

Financial statements are prepared with the objective to provide fair review, reliable and relevant information to the key stakeholders of the company. Annual report analysis (2012, p. 3) identifies management and directors as the responsible authority to prepare financial statements. Since the company is listed on the New York Stock Exchange of the US, these responsible authorities prepare financial statements in accordance with GAAP principles (Ametek, 2012, p. 3). Evidence to the notion is provided in the opening statements of the annual report, where all the information contained in the annual report is witnessed to be in accord with Section 13 of the Securities Exchange Act 1934 (Ametek, 2012, p. i).

Q. 2 - Importance to Follow Standard Set of Accounting Policies

Every company including Ametek, which is listed on the NYSE, is required to comply with generally accepted ways to record and report accounting information i.e. GAAP (Thomson, 2013, p. 1). GAAP is a set of standards that helps Ametek to include relevant financial information and avert the likelihood of manipulation in financial accounts. GAAP is important because it enables Ametek to identify and represent important information such as classification of balance sheet items and revenue recognition. Moreover, it helps Ametek to minimize consistency level in financial statements, which can assist investors in investment decisions. Nonetheless, GAAP is a flexible accounting principle that allows Ametek to meet the information needs of internal and external decision makers (Ametek, 2012, p. 8).

Q. 3 - Analysis of Ametek's Income Sources

Table 1 illustrates Ametek's amounts of revenue, operating income and net income for FY 2011 and 2012. Relative study of these two years shows that the company is expanding and growing, which is evident from 11.52% increase in the sales revenue and 17.30% increase in the operation income. In addition to this, comparative analysis of the identified two years shows that Ametek is a profitable company because it posted 19.40% increase in the net income (Ametek, 2012, p. 22).

Income Statement Items

2012 ($'000)

2011 ($'000)

% Change

Revenue

3,334 2,990

11.52%

Operating Income

746 636

17.30%

Net Income

459 385

19.40%

Table 1: Analysis of Income Sources (Ametek, 2012, p. 20)

Three years trend analysis of revenue is shown by table 2 and it indicates an upward trend. Over the three years, the company has reported improving graph of revenue. Hence, it can be said that revenue trends are favorable for Ametek, Inc (figure 1).

 

2010

2011

% Change

2012

% Change

Revenue

2,471.00 2,989.9

21.00%

3,334.2

11.52%

Table 2: Trend of Revenue (Ametek, 2012, p. 20)

Figure 1: Trend Analysis of Revenue (Ametek, 2012, p. 20)

Q. 4 - Analysis of Ametek's Financial Position

Table 3 provides two years' information on Ametek's total assets, total liabilities and total equity position. Analysis of the balance sheet proves that the accounting equation is true for Ametek (Ametek, 2012, p. 20). It means that the worth of company assets is equivalent to total assets and liabilities of the ...