Finance is the study of investment. It includes assets and liabilities and also being associated with risk. Finance is mainly focused towards pricing assets on risk level and expected ROI. Finance has three categories and they are public finance, corporate finance and personal finance. Both owners and managers can use financial statements in order to make the long term business decisions. Readers of financial statement need to have knowledge about performance and disposition of business. They are capable of making decisions about the business based on the information contained in the statements. For large corporations, these statements will include extensive set of notes to the financial and explanation of financial policies. Owners and managers will frequently use financial statements in order to make some important decisions on business.
It will verify,
- Whether it is possible to purchase certain materials or not.
- Whether to acquire some production of goods.
These documents will be really useful to take long term decisions. A government entity needs financial statements to ascertain property and accuracy of taxes. Vendors who are in need of extending credit may use financial statements to assess the creditworthiness of business. Employees can also use reports in making collective bargaining agreements.
Inclusion Of Finance:
Financial statements are explanation of monetary data about enterprise. The most common financial statements include balance sheet, income statement, statement of changes of financial position and statement of retained earnings. Financial statement can be drawn up for private individuals, non profit organizations, retailers, wholesalers, manufacturers and service industries. The nature fo enterprise affect the kind of data available in the financial statements. The main purpose of user will affect the data beings searched by him or her. Balance sheet will offer the user about data which contains available resources. The income statement will provide user with data about profit of enterprise detail of sources of revenue. The statement of changes of financial position will show the sources and uses of financial resources, showing demo of capital structure. If you compare financial statements, then it may form the basis for financial analysis. There are four types of finance and they are as follows, Comparison of statements for the enterprises in between successive years. The comparison can also be made with specific competitor. The comparison can also be occurred between firms in standard. Even the comparison can also be made between the target and the company’s successive budget. These follow the accounting methods being used by Organization. Size and type of Organization may use various accounting methods.