Sweat equity share :-As per Section 2(88) of the Companies Act, 2013 sweat equity shares means

such
equity shares as are issued by a company to its directors or employees at a discount or for
consideration, other than cash.

Window dressing is the term for a strategy used by retailers—dressing up a window display—to draw in
customers. The financial industry adopted it to refer to the practice of altering financial data to appear
more attract investors.

IMPORTANCE OR USERS OF FINANCIAL STATEMENTS

Financial statements constitute valuable piece of information to various users in different ways. The
users of such statements can be internal (within the organisation) or external (outside the organisation).

Users of Financial Statements

A. Internal (within organisation)

B. External (outside organisation)

A. Internal Users

(1) Management is interested in knowing the existing profits, earnings per share, chances of survival,
possibility of growth and diversification, relative performance, cost information etc., from the financial
statements so that it can chalk out suitable strategy for its entity.

(2) Shareholders Owners. Shareholders or proprietors of the business are interested in the well being of
the business. They are likely to know the earning capacity of the business and its prospects of future
growth. Since they are not involved in the day to day working they come to know the results of
operations and financial position of the business only through financial statements.

(3) Employees are interested in job satisfaction, job security, promotion avenues, bonus declarations,
employee's welfare schemes etc. of their unit. So they want information on profitability and future
prospects of the company.

B. External Users

(1) Creditors are interested in knowing entity's capability to repay the amount and interest as and when
repayment becomes due. So, they are interested in finding out profitability, cash flows etc. of the entity.

(2) Bankers and other financial institutions are interested in the security of the loan advanced, entity's
capacity to repay the principal interest as per terms. So, institutional lenders shall find out profitability,
cash in flows, total commitment of the borrower, future prospects etc.

(3) Government is interested in levying taxes on revenue, in regulating legal compliance, in knowing
employment generated, in contribution of the entity towards national
 LIMITATIONS OF FINANCIAL STATEMENTS
Most people believe that financial statements are precise and authentic. This belief is strengthened by
the certificate given by the auditor "...ture and fair view of the state of affairs..." Of late financial
statements have attracted lot of criticism.
It shall be useful for the analyst to be aware of the limitations from which financial statements suffer.
(1) Records only monetary facts. Financial statements disclose only monetary facts i.e. those
transactions are recorded in the books of accounts which can be measured in monetary terms. Those
transactions which cannot be measured in monetary terms such as conflict between production
manager and marketing manager may be very important for a business concern but not recorded in the
business books.
(2) Financial statements are historical in nature. Financial statements are prepared from the accounting
records relating to the period which is already over. Naturally. they disclose the post results ting to the
period which entity of the past. Such information can help us in conducting the position of the entityt
likely to be of much help planning and forecasting.
(3Financial statements are often misconceived as "final accounts," but they are actually interim reports
due to their preparation based on the accounting period concept. These statements only provide a
snapshot of the results and position of an entity within a specific period, typically a year. However, they
do not represent final outcomes as the entity's operations may continue beyond the reporting period.
4) Financial statements are influenced by accounting concepts etc. Preparation of financial statements is
based on basic accounting concepts, conventions etc. In some cases it results in unrealistic information.
For example, "going concern concept is responsible for showing assets at cost less depreciation. It is
known as "written down value" or "book value". This value neither represents the realisable value.
(5) Financial statements are influenced by personal judgement. Accounting is based on "generally
accepted accounting principles." (GAAP). On many issues more than one methods are permitted by
GAAP. For example, method of depreciation, mode of amortization, treatment of deferred expenses,
valuation of stock, valuation of goodwill etc., all depend upon the personal judgement of the policy
maker of the unit. Following different method affects the ascertainment of profit. This creates suspicion
in the minds of outsiders. Credibility of accounting has also suffered.
However the convention of consistency acts as a controlling factor on making indiscreet personal
judgements.
 OBJECTIVES OF CASH FLOW STATEMENT

The main objectives of cash flow statements are

1.Identify Sources of Cash. To recognise the sources from operation, investing and financing activities
from where cash and cash equivalents are generated.

2. Identify Uses of Cash. To recognise the uses by operating, investing and financing activities, for which
cash and cash equivalents were used by the enterprise.

3. To Ascertain Net Changes in Cash. To compute the net change in cash and cash equivalents indicating
the difference between sources and uses from operating, investing and financing activities between the
dates of two balance sheets.

The information about the cash flows of the enterprise, when provided to the users of financial
statements in the above manner, provides a basis to assess the ability of the enterprise to generate cash
and cash equivalents and the needs of the enterprise to utilise those cash and cash equivalents.

USES AND SIGNIFICANCE OF CASH FLOW STATEMENT

Cash flow statement is of vital importance to the financial managers. It is an essential tool of financial
analysis for short term planning.

The advantages of cash flow statements are as follows:

1. Evaluation of Cash Position. Since Cash Flow Statement is based on the cash basis of accounting, it is
very useful in the evaluation of cash position of a firm.

2. Cash Planning. A projected cash flow statement can be prepared in order to know the future cash
position of a concern, so as to enable a firm to plan and co-ordinate its financial operations property.

3. Comparison is Possible. A comparison of historical and projected cash flow statement can be made so
as to find the variations and deficiency in the performance so as to enable the firm to take immediate
and effective action.

4. Helps in Capital Budgeting Decision. Cash flow statement helps in planning the repayment of loans,
replacement of fixed assets and other similar long-term planning of cash. It is also significant for capital
budgeting decision.

5. Dividend Decision. It explains the causes for poor cash position inspite of substantial profits in a firm
by throwing light on various application of cash made by the firm. It further helps in answering some
intricate questions like what happened to the net profits? Where did profits go? Why more dividend
could not be paid in spite of sufficient available profits.
 LIMITATIONS OF CASH FLOW STATEMEΝΤ

(i) Misleading comparison over a period of time. Just because company's cash flow has increased in the
current year, a company may not be better off than the previous year. Thus a comparison over a period
of time can be misleading

(ii) Influenced by changes in management policies. The cash balance as disclosed by the cash flow
statement may not represent the real liquid position of the business. The cash can be easily influences
by purchases and sales policies, by making certain advance payments or by postponing certain payments

(iii) Misleading inter-industry comparison. Cash flow statement does not measure the economic
efficiency of one company in relation to another. Usually a company with heavy capital investment will
have more cash inflow. Therefore, inter-industry comparison of cash flow statement may be misleading.

(iv) Cannot be equated with income statement. Cash flow statement can not be equated with the
income statement. An income statement takes into account both cash as well as non-cash items. Hence,
net cash flow does not necessarily mean net income of business.

(v) Assessment of Liquidity. Cash flow statement does not help the management in assessing the
liquidity of company because it studies only about cash and cash equivalents.