Analysis of Financial Performance and Position-Practice Tests Academy

1. Analysis of Financial Performance and Position-Practice Tests Academy

2. As businesses grew, there came a divorce between ownership and management of business. Often the owners of a business, that is the shareholders, appointed professionals to handle the day to day running of the business, that is the “management”, give rising to an “Agency” relationship. The shareholders appoint agents, that is the management team, to run their business. The shareholders require frequent reports on how their business is performing. To have objective and useful reports regarding the efforts of management and its results, financial reporting was devised. • Understanding the need for Financial Statements

3. Financial reports are objective statements which show the financial performance and position of a business for a given time period. They are usually for the quarter, half-year and for annual time spans. They are usually made using International Financial Reporting standards, or the accounting standards prescribed by local law.

4. To put it a nutshell the purpose of financial statements is to provide information which shows:

5. Financial Performance

6. Financial Position

7. Cash flows of the business

8. The above information is presented, so the various stakeholders of the business, including the management and the shareholders can use the information, and compare it with past information, and that of other businesses. The ultimate goal is to understand and access the performance of the business.

11. More detail-

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