To measure the size of the business, this will also help assess the riskiness of the business, apart from size, the nature of the business needs to be taken into account: a gold prospecting business will have different level of risk and return than a building society.
The economic, social and political environment, examples of the way in which the economic, social and political environment affects industry can be found in virtually any daily paper.
The industry trends, effects of changes in technology, in order to make any judgements about performance and more especially about the future, it is important to understand the way that the industry is going.
Statement of financial position helps projections and predictions of the future, financial analysis must relate not just what's happening in present but also what will or is going to happen in the future.
This will also effect of price changes from affects of technology to a more specific factor for example, the price of property has risen faster in recent years, which has raised general changes in prices.
Finally this information can be collected from the following statements and explanatory material from the income statement, the balance sheet, the accounting policies statement, the cash flow statement and the notes to the accounts.
The purpose of Statements of Financial Accounting Concepts is to : A establish GAAP.
Projected financial statements are estimated financial statements before starting of any operating activity for planning purpose.
The purpose of an audit is to add credibility to the financial statements of a business organization.To give credence to the accounting records, accounting polices and financial statements of an audit client.
The goal in analyzing financial statements is to assess a company's past performance, current financial position; and to make predictions about the company's future performance. This directly relates to stocks, bonds, and other financial instruments.
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The main objective of financial statements is to provide relevant and reliable information about the financial performance and position of an entity to a wide range of users to assist them in forming their economic decisions. For example, investors require financial statements to judge the profitability of their investments. Lenders require them to assess the credit worthiness of potential clients. Management requires financial statements to manage the affairs of the company in the interest of shareholders. Government may require financial statements to assess the accuracy of tax returns.
B. Analyse your current financial position
The purpose of accounting is provide information to the users like investors ,financial institutions and to other clients. The four basic financial statements are balance sheet,income statement,cash flow,statement of retained earning.
The accounting system that reveals the financial position of a business is financial accounting. Financial accounting produces statements called the balance sheet, and profit statement. These two statements allow for further calculations to see how the business is handling cash flows, account receivables, financial leverage, etc.
Full set accounting refers to a set of financial statements. The statements are made up of financial position, comprehensive income, changes in equality, and cash flow.
it refers to the assessment of financial statements of a company to make decisions regarding performance and financial position. it covers various areas of a company, like profitability, liquidity, solvency, and market value.
How might changing one of the financial statements affect the other financial statements?