British Institute

ology & E-commerce

Program: MBA (INNOVATIVE MANAGEMNET)

SESSION: Jan 2011

SUBJECT: FINANCIAL REPORTING

SUBMITTED BY: RAHAT ALI

STUDENT ID: 41564

SUBMITTED TO: DR. JOY K JOSEPH

DATE: 13 April 2011

Introduction To Financial Reporting:
Financial Reporting are those report for the business’s (large & small) which
details its activities. They consist of balance sheet cash flow statement and
income statement. Balance sheet is the position statement and the end of
accounting period .Cash flow statement forecast, as cash is key factor affecting
all the organization. Income statement uses the accounts to establish profit or
loss.
All these statements are equally important for analysis of the company. It gives
freedom for the individual judgment in order to analyze the financial status.

Purpose of financial statements by business entities:

The objective of financial statements is to provide information about the
financial position, performance and changes in financial position of an enterprise
that is useful to a wide range of users in making economic decisions. Financial
statements should be understandable, relevant, reliable and comparable.
Reported assets, liabilities, equity, income and expenses are directly related to
an organization's financial position.
Financial statements are intended to be understandable by readers who have a
reasonable knowledge of business and economic activities and accounting and
who are willing to study the information diligently. Financial statements may be
used by users for different purposes.
Owners and managers require financial statements to make important business
decisions that affect its continued operations. Financial analysis is then
performed on these statements to provide management with a more detailed
understanding of the figures. These statements are also used as part of
management's annual report to the stockholders.
Employees also need these reports in making collective bargaining agreements
(CBA) with the management, in the case of labour unions or for individuals in
discussing their compensation, promotion and rankings.
Prospective investors make use of financial statements to assess the viability of
investing in a business. Financial analyses are often used by investors and are
prepared by professionals (financial analysts), thus providing them with the
basis for making investment decisions.
Financial institutions (banks and other lending companies) use them to decide
whether to grant a company with fresh working capital or extend
debt securities (such as a long-term bank loan or debentures) to finance
expansion and other significant expenditures.
Government entities (tax authorities) need financial statements to ascertain the
propriety and accuracy of taxes and other duties declared and paid by a
company.
Vendors who extend credit to a business require financial statements to assess
the creditworthiness of the business. Media and the general public are also
interested in financial statements for a variety of reasons. There are few
financial analysis method are discussed in order to find out how we use financial
statements such as balance sheet and income statements. And different
methods are used to measure the performance of the firm which are as follows:

Analysing Company:
The principal methods for which the company can be analysing the performance
are as follows:

 Quantitative performance measurement

 Financial Measures
 Qualitative performance measurement
 Non-financial measures
 The balanced scorecard
 The building block model

INTRODUCTION to CORPORATE FINANCING

Organization performance management is a blend of systematic processes and

that facilitate the management to get one or more pre-selected objectives. They
are interrelated to each other for the reason that the management has to
describe its goals and the managers in respect of the data gathered for the
enterprise are very spotlight on the future better performance of the company.
Enterprise performance management in the company is occupied in producing
management reports and of use information related to market and others for
the enterprise.
Enterprise performance management attains 3 activities:

1. Role of management participation in related to data obtains for

company.
2. Information strength applicable to the specific organization.
3. Goal comparison

In order to judge the company performance we need to look overall

performance over the year. Only the detail analysis can tell if the company is
performing well or not. Otherwise if it needs improvements.
Financial Analysis

Financial analyses are of dissimilar types and design which are related to the
data available and the task that is performed by the organization. Financial
analysis can be classified in 4 different categories by keeping a view of
information and design of the operation.

 Internal Analysis:

Internal analyses are more systematic than external analysis in general,

and are also dealt by the Finance department of the company.

 External Analysis:

The external analyses is done by the peoples or firms outside the

company usually called stakes holders i.e. banks, insurance companies
and other stockholders etc.

unlike methods are also used to analyse the performance of the company that
are listed below:

 Vertical analysis
 Horizontal analysis

Vertical analysis is done by comparing the other figure by the base and the base
need to be selected before like total asset select as base 100% & compare the
remaining balance sheet with this amount.

Horizontal analysis is a method in which each value is compare with its equitant
value of the last year’s value. And it presents those values in horizontal
columns.

Other tools used for financial analysis are as follows:

A. Ratio Analysis

B. Trend Ratios or percentages

C. Cash Flow Analysis

D. Comparative Financial Statements

E. Common Size Statements

F. Funds Flow Analysis

These methods are applied to present the financial data in more comprehensive
and sophisticated approach in order to help with decision process.
NON-FINANCIAL Analysis:
Balance score card:

The managers normally look the presentation of the organization by the

different aspects which are as follows:

Customer Aspect:

The performance of the company by the customer aspect pushes to view

the customer’s perspective, the level of satisfaction and how the
organization will deliver their products and services to the end users.

 The company provides services to the customers.

 The potential to enter in to the new markets.
 The level of satisfaction provided by the company to the customers.

Internal business Aspect:

In this Aspect the focus is on to have a below mentioned areas.

 The quality of the performance taken by the enterprise.

 The level of by and large performance of the organization
 The level of convention the prospect of the customers
 The areas where the firm is improving

Innovation and learning Aspect:

This aspect focus on the couple of points given below;

 Level of training given by the company

 How dynamic the firm will be

Financial Aspect:

Shareholders are more focused in this Aspect specifically in relation to

mention below;

 Cash Flow statement attractive appearance

 The level of market shares the company is presently having

Performance measured in non profit organization:

The goal of the non profit organisation is provide service of social or moral
value. we will attempt to measure this service.

The purpose for such an organization may comprise the following:

  user satisfaction
 Maximisation of left-over
 expansion

Value for money:

Value for money is a structure by which non profit organisation can be

calculated. It separates the performance of business into 3 main areas also
known as by three E’s.

 Effectiveness (an output measurement)

It describes that how good the organisation achieve its goal. possibly an
easier way of understanding it would be to see how well the output of
services match the customer requirement.
 Efficiency (the relation between input and output)
It describes how efficient funds are used; it calculates the output of
services for a specified level of resources of the input.
 Economy (an input measurement)
It measures the cost of sourcing the input assets. The goal is to reduce
the cost of the input for a given pattern and level of the resource.

Conclusion:
The above discussion is based on the financial reporting’s concept and principal
methods used to analyse the performance of different companies. Which can be
done by different methods and different aspects such as financial and
nonfinancial analysis, qualitative and quantitative analysis? In non profit
organization performance is measured in different terms and financial analysis
is done in the corporate firms and organization. All this analysis is done on the
basis of financial statements produced so balance sheet and profit loss
statements play a key role in order to assess the company performance and to
satisfy different user groups such as government, public, and business contacts
including suppliers, trade creditors and customers etc.