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Manager

Income Statement: This sheet displays the revenues and expenses of a


company for a specific period of time. Managers can find a wealth of valuable
information on the Income Statement including the companys sales, profitability,
retained earnings, gross profit, and operating income. Usually Income Statements
provide information for more than one period, for example two consecutive years.
It is easy to compare the results from one period to the next and determine
trends in sales and income growth.
Cash Flow Statement: This way a company is able to keep track of how much
cash it has on hand to pay expenses and buy assets. A cash flow statement can
tell you if youre running out of money while youre profitable. A cash flow
statement can tell you if the owner is taking too much money out of the business.
You will see the results of building inventory, letting receivables grow or paying
suppliers more quickly. Capital purchases show up as an expense. Youll see what
your bank loan payments are doing to your cash.
Balance Sheet: The balance sheet shows what the business has (assets) and
what the business owes against those assets (liabilities). The difference between
the assets and the liabilities shows the net worth of the business. The net worth
of the business is important in that it is a measurement of the time the business
is expected to stay in financial power. The balance sheet also provides the
business with information on how best it is able to pay its debts. The balance
sheet assists the managers of businesses in making decisions regarding
purchasing of equipment for the business. Business managers depend on the
balance sheet to analyze whether buying certain equipment on debt is the right
move for the business at that time. Business managers need the balance sheet
so as to decide the best source of credit for the business at that time. The
balance sheet shows the accounting equation in a physical representation. The
balance sheet also shows the owner's equity, for example, it shows the value of
the stock and the number of shares outstanding. The Balance Sheet also shows:
The productivity and solvency of the business. The amount of capital retained in
the business. How fast or slow assets can be converted to capital. The general
financial state of the business at a specific point in time.
Changes in Equity Statement: A Changes in Equity Statement shows the
owner's capital at the start of the period, the changes that affect capital, and the
resulting capital at the end of the period. Statement of Changes in Equity helps
users of financial statement to identify the factors that cause a change in the
owners' equity over the accounting periods.
Notes to Financial Statements: It is possible for companies to grossly inflate
the number and value of their fixed assets, so here they can see the real value of
them.
Government
Government officials are generally concerned that reporting and valuation
regulations have been complied with - and that taxable income is fairly
represented. So they look at the Balance Sheet to see if all the liabilities and
taxes are paid accordingly, and that the VTA for the assets is fairly represented
(also they check the Notes to Financial Statements to see if the assets are
not artificially inflate or deflate). The Notes to Financial Statements are also
checked in order to see if the stamp tax has been paid on time and in the correct
value. Moreover, in order to see the liquidity or solvency of the company and if it
is running according to the law, the government can also check the Income
Statement. Also, the Cash Flow Statement is useful for showing how cash

payables are dealt with, because, for instance, a lack of payments for workers for
a long period of time can affect the whole society.

Investor
Balance Sheet: Investors normally are attracted to companies with plenty of
cash on their balance sheets. After all, cash offers protection against tough times,
and it also gives companies more options for future growth. Growing cash
reserves often signal strong company performance. Indeed, it shows that cash is
accumulating so quickly that management doesn't have time to figure out how to
make use of it. A dwindling cash pile could be a sign of trouble. That said, if loads
of cash are more or less a permanent feature of the company's balance sheet,
investors need to ask why the money is not being put to use. Cash could be there
because management has run out of investment opportunities or is too shortsighted to know what to do with the money.
Inventories are finished products that haven't yet sold. As an investor, you want
to know if a company has too much money tied up in its inventory. Companies
have limited funds available to invest in inventory. To generate the cash to pay
bills and return a profit, they must sell the merchandise they have purchased
from suppliers. If inventory grows faster than sales, it is almost always a sign of
deteriorating fundamentals.
Receivables are outstanding (uncollected bills). Analyzing the speed at which a
company collects what it's owed can tell you a lot about its financial efficiency. If
a company's collection period is growing longer, it could mean problems ahead.
The company may be letting customers stretch their credit in order to recognize
greater top-line sales and that can spell trouble later on, especially if customers
face a cash crunch. Getting money right away is preferable to waiting for it since some of what is owed may never get paid. The quicker a company gets its
customers to make payments, the sooner it has cash to pay for salaries,
merchandise, equipment, loans, and best of all, dividends and growth
opportunities.
Notes to Financial Statements: Non-current assets are defined as anything
not classified as a current asset. This includes items that are fixed assets, such as
property, plant and equipment. Unless the company is in financial distress and is
liquidating assets, investors need not pay too much attention to fixed assets.
Since companies are often unable to sell their fixed assets within any reasonable
amount of time they are carried on the balance sheet at cost regardless of their
actual value. As a result, it's possible for companies to grossly inflate this
number, leaving investors with questionable and hard-to-compare asset figures.
Income Statement: You can gain valuable insights about a company by
examining its income statement. Increasing sales offer the first sign of strong
fundamentals. Rising margins indicate increasing efficiency and profitability. It's
also a good idea to determine whether the company is performing in line with
industry peers and competitors. Look for significant changes in revenues, and
costs of goods sold to get a sense of the company's profit fundamentals. Usually
Income Statements provide information for more than one period, for example
two consecutive years. It is easy to compare the results from one period to the
next and determine trends in sales and income growth.

Cash Flows Statement: Cash Flows from Operating Activities shows how much
cash comes from sales of the company's goods and services, less the amount of
cash needed to make and sell those goods and services. Investors tend to prefer
companies that produce a net positive cash flow from operating activities. Cash
Flows from Investing Activities reflects the amount of cash the company has
spent on capital expenditures, such as new equipment or anything else that
needed to keep the business going. It also includes acquisitions of other
businesses and monetary investments such as money market funds. You want to
see a company re-invest capital in its business by at least the rate of depreciation
expenses each year. If it doesn't re-invest, it might show artificially high cash
inflows in the current year which may not be sustainable. The Cash Flow signals a
company's ability to pay debt, pay dividends, buy back stock and facilitate the
growth of business.
Changes in Equity Statement: A Changes in Equity Statement shows the
owner's capital at the start of the period, the changes that affect capital, and the
resulting capital at the end of the period. So the investors can see how the capital
had been used in order to earn profit and if the way of using the capital is
profitable on long term or short term period of time.
Customer
A buyer may look closely at inventory turnover. Too much inventory may mean
excessive storage space and spoilage, whereas too little inventory could mean
loss of sales and customers due to stock shortages. This kind of information is
found by analyzing the Cash Flow Statement and the Balance Sheet assets.
Also, a customer may be interested in finding out the overall liquidity and
solvency of a company by analyzing the liabilities from the Balance Sheet and the
Income Statement. A company that has too many liabilities and debts and that
is not able to earn a profit on the resources that had been invested in it, might
not look trustful and attractive for clients. Analyzing the speed at which the
company collects the money from the customers is also an important decision
making factor, because the customer can face a cash crush and he/she will not
be able anymore to pay his/her debts for at least a short period of time.
Employer
Employers pay particular attention to sources of increased wages and the
strength and adequacy of pension plans (which tend to be chronically
underfunded). A prospective or actual employer will check the Balance Sheet in
order to see the overall solvency and liquidity of the company, so that he/she can
determine how profitable is for the future to remain in the same company. The
Income Statement can bring a more in depth review of the revenues and
expenditures of the company, and the ability it has to produce cash by using the
resources it has. If the company is not productive enough, it might need to hire
more people, and if the revenue still does not increase, this might cause a
decrease in the wage/salary of employers. The Cash Flow Statement can bring
a more detailed presentation of how money in the company are spent: if the
salaries and wages are paid on time, if the company plans on investing in new
technology and machines (this will decrease the need for human workforce,
especially of unskilled workers), if it might have some problems with the law in
the future etc. The other two financial statements, Changes in Equity
Statement and Notes to Financial Statements are not of particular interest,
but can offer a more complete perspective over the companys economic
background. Moreover, usually Income Statements provide information for more
than one period, for example two consecutive years so it is easy for a propective
employer to compare the results from one period to the next and determine
trends in sales and income growth.

Stakeholder (bank)
Income Statement: The income statement breaks down the sales proceeds and
the expenditures of the company to show the source of the company's net profit.
The income statement allows the bank to answer such questions as how
expensive the product or service is to provide, as a percentage of the sale price,
or how much the fixed costs, such as rent, eat into profits. The income statement
reveals whether the company provides a premium product with a high profit
margin but relatively low volume or pursues a discounted price/high volume
strategy. These reveal whether the profit figures are sustainable over the coming
quarters and years, given the expected shifts in the competitive landscape and
the broader economy.
Cash Flow Statement: Along with the income statement, the bank also studies
the cash flow statement. This statement details the sources of cash inflows as
well as outflows. Cash in and outflows during a particular financial period may be
consequences of actions taken a long time ago. The repayment of a loan taken
out years ago will result in a significant cash outlay and is featured prominently in
the cash flow statement. However, it is neither a profit nor a loss and will not be
found in the income statement. The bank therefore has to carefully consider how
the company used its cash resources to understand if it will have the cash to
repay the loan.
Balance Sheet: A company's balance sheet is essentially a breakdown of what it
owns and what it owes. All assets, including land, equipment, office and factory
buildings, cash and so on are on the right hand side of the balance sheet.
Liabilities, such as loan obligations to other banks, payables to suppliers for items
purchased on credit or upcoming tax payments are on the right hand side of a
balance sheet. The bank must be aware of these details, because if profits fail to
supply enough cash to pay the loan, proceeds from selling the assets is the only
source that can be tapped into.
Notes to Financial Statements: Non-current assets are defined as anything not
classified as a current asset. This includes items that are fixed assets, such as
property, plant and equipment. Since companies are often unable to sell their
fixed assets within any reasonable amount of time they are carried on the
balance sheet at cost regardless of their actual value. As a result, it's possible for
companies to grossly inflate this number, leaving banks with questionable and
hard-to-compare asset figures, especially because those might be the only source
to get the money back if the company goes bankrupt.
Shareholder
Shareholders tend to be most interested in profitability and the indicators of longrun solvency. They check the Balance Sheet to see the assets of the company
and how it has been able to deal with its liabilities. Also, this shows the owners
equity, so the shareholder can see how much profit he/she earned from the
company in the previous year/operating period. The Income Statement can
show how the company has been able to use the cash invested by the
shareholder in order to generate profit and if there should be made some
changes in the way the money are used by the managerial system. The Cash
Flow Statement can clearly show where every invested dollar went to, and
whether there should be more money invested in a certain compartment of the
company. It shows how much money has been invested on machines and
technology, on human workforce, on advertising, etc., and how this is reflected in
the overall productivity of the company. The Notes to Financial Statements
can be used in order to check the true value of the company assets, which can be
underrated or overrated in the Balance Sheet and the other documents.

Cash Flow Statement: This way a company is able to keep track of how much
cash it has on hand to pay expenses and buy assets. A Cash Flow Statement can
tell you if youre running out of money while youre profitable. A Cash Flow
Statement can tell you if the owner or other shareholders are taking too much
money out of the business. You will see the results of building inventory, letting
receivables grow or paying suppliers more quickly. Capital purchases show up as
an expense. Youll see what your bank loan payments are doing to your cash.
Statement of Changes in Equity helps users of financial statement to identify
the factors that cause a change in the owners' equity over the accounting
periods. Whereas movement in shareholder reserves can be observed from the
balance sheet, statement of changes in equity discloses significant information
about equity reserves that is not presented separately elsewhere in the financial
statements which may be useful in understanding the nature of change in equity
reserves. Examples of such information include share capital issue and
redemption during the period, the effects of changes in accounting policies and
correction of prior period errors, gains and losses recognized outside Income
Statement, dividends declared and bonus shares issued during the period.
Movement in shareholders' equity over an accounting period comprises the
following elements:
- Net profit or loss during the accounting period attributable to shareholders
- Increase or decrease in share capital reserves
- Dividend payments to shareholders
- Gains and losses recognized directly in equity
- Effect of changes in accounting policies