Theoretical: Do financial statements help in Financial decisions and corporate valuation

Theoretical Framework

Conventional managerial financial decisions and corporate valuations are based on financial statements analyses. This is because the two essential manuscripts, the monthly income statement and balance sheet statements illustrate an official sheer portrait of a company’s financial status. The two manuscripts or documents contain comprehensible company profile in terms of figures revealing vital information like a ‘blood test or an x-ray’ as it reflects Net Income, Total Assets, Total equity, Total Debt, Total Liabilities, Total Revenue, Total Cost, Current assets, Current Liabilities, Net present value, and Market Value among others. Otherwise, the financial statement illustrates company status in terms of liquidity, profitability, and solvency (Pratt, 2003; Hunt, Weygandt, Kieso, and Kimmel, 2003; Albrecht, Stice, Stice, and Skousen, 2002; Kiyosaki and Lechter, 2002; Ross, Westerfield, Jordan, 1996):

Aims: Do financial statements help in Financial decisions and corporate valuation

Aim of the Study

The researcher’s aim in conducting this research is to establish if indeed financial statements underpins financial decisions and corporate valuations using banks’ official economic declarations.

Statement of the Problem

The researcher is interested to discover if indeed financial statements help in financial decisions and corporate valuations of Compass Group PLC, Toronto Dominion Bank, Harris Corp, Morgan Stanley, and Boeing Co., banks official economic declarations.

Specifically the researcher was directed to answer the following questions:

1. What is the company profile of the selected banks of the United State of America in terms of: a) Net Income, b) Total Assets, c) Total equity, d) Total Debt, e) Total Liabilities, f) Total Revenue, and g) Market Value?

2. Are the liquidity ratios, the profitability ratios, and the solvency ratios used for wage negotiations, takeovers and mergers, and private share purchases?

3. Do selected firms use income, expenditure or balances in financial statements in financial decisions?

4. What is the firm value of the selected banks of the United State of America?

5. Do Financial Statements Help in Financial Decisions and Corporate Valuations?

Hypotheses

1. Ho: There is no company profile of the selected banks of the United State of America in terms of: a) Net Income; b) Total Assets; c) Total equity; d) Total Debt; e) Total Liabilities; f) Total Revenue; and g) Market Value;

2. Ho: The liquidity ratios, the profitability ratios, and the solvency ratios are not used for wage negotiations, takeovers and mergers, and private share purchases;

3. Ho: Selected firms do not use income, expenditure or balances in financial statements in financial decisions;

4 Ho: There is no firm value of the selected banks of the United State of America; and

5. Ho: Financial statements do not help in financial decisions and corporate valuations.

Do financial statements help in Financial decisions and corporate valuation

DO FINANCIAL STATEMENTS HELP IN FINANCIAL

DECISIONS AND CORPORATE VALUATIONS

Apparently, the first figures on a balance sheet that appeals to any ‘real world’ probable investor would be the liabilities and stockholders’ equity, and assets. The liabilities would reveal payables. For example, account payables on wages and taxes. While the assets reveal cash positions and account receivable. However, the academic or scholastic treatment of assets is quite different from the real world. This is because in the real world, accounts receivable listed under assets that are delinquent for a certain period of time is definitely not reliable as a source to cover accounts payable. In other words, a financial statement that does not reveal any cash positions but only accounts receivable, delinquent at that, under assets, reveals that the company is using the employees’ money to keep the company above water, which is a dishonest management work. Or, simply, the company is broke and should liquidate what is left to pay the liabilities, and then, fold (Kiyosaki and Lechter, 2002).

Nevertheless, some managers would speculate that when the cash position on financial statement reveals a zero figure, the company may only be on short term credit problem. This is because some managers gamble company survival over accounts receivable. While waiting, the company may be sustained by the cash kept for wages and taxes. But, some very rich people would consider these ideas as either lack of correct financial education or just clear and simple sign of being a consistent lawbreaker.

Intro: Do Financial statements help in finacial decisons and corporate valuations

CHAPTER 1

Introduction

This section presents the overview of the study, background of the study, aims of the study, statement of the problem, significance of the study, theoretical framework of the study, hypotheses, and definition of key terms.

Background of the study

In 2002, Robert Kiyosaki and Sharon Lechter in some way predicted the current economic downturn. How did they do that? Kiyosaki and Lechter supposed that financial statements of companies reveals not only the importance of accounting and accountabilities, but also is a reflection of the moral fiber of the owner or owners. The figures according to Kiyosaki and Lechter tell the story of the disposition of whoever is in charge of the money. Apparently, the authors could have gathered a clear picture of the country’s financial statement.

At one point, by just looking at the company’s financial statement of his son and nephew Kiyosaki made an uncompromising statement, ‘your company has financial cancer . . . and I’m afraid its terminal. You boys have mismanaged what could have grown into a rich and powerful company’ (Kiyosaki and Lechter, 2002).

Top Richest people in the Forbes

I. Introduction

Top Richest People in the Forbes List is one of the most ambitious dreams of every people in the world. This needs a lot of concentration and an attitude to flag to make some edge among others. This study’s main objective is to prove if Billionaires, who are citizens of the United States and have more life experiences, have more wealth than those who are younger and from other countries.

The paper presents the analyses, and interpretation of the data collected from

http://www.forbes.com/lists/2009/10/billionaires-2009-richest-people_The-Worlds-Billionaires_Rank.html. The formulated questions identified in the problem were used as the bases for the presentation. The sequence of structure includes tables, analysis and interpretation of data of the current study.

Data of Top Richest people in the Forbes

II. Data
There were 25 Billionaires from list of Forbes 2009 world’s Billionaires who are presented in the website. All of the listed billionaires were included in this study. The billionaires residence were Switzerland, Sweden, United States, France, Canada, Germany, United Kingdom, Saudi Arabia, Mexico and lastly the India.

Majority of the Billionaires were reside in United States with 11 population or 44%, followed by 12% of Germany, and 8% of France (see table 1).
Table 1. List of Forbes 2009 world’s Billionaires
Rank-- Net Worth ($bil)-- Age-- Citizenship --------Residence
1 ------------40------------------ 53 ----United States ----United States
2 ------------37------------------ 78-----United States----United States
3------------35 ------------------ 69---- Mexico-----------Mexico
4------------22.5---------------- 64-----United States----United States
5------------22 ------------------83-----Sweden----------Switzerland
6------------21.5 ----------------89-----Germany--------Germany
7------------19.5 ----------------51------India-------------India
8------------19.3----------------58------India------------United Kingdom
9------------18.8----------------87------Germany--------Germany
10-----------18.3----------------73------Spain------------Spain
11-----------17.8----------------61-------United States---United States
12-----------17.6----------------59 ------United States---United States
12-----------17.6----------------54 ------United States---United States
12-----------17.6----------------65 ------United States---United States
15-----------16.5----------------60------ France----------France
16-----------16.2----------------80------ Hong Kong-----Hong Kong
17-----------16------------------67 ------ United States---United States
18-----------14.5---------------61 ------- Sweden---------Sweden
19-----------14 -----------------73 -------United States---United States
19-----------14-----------------68--------United States---United States
21-----------13.4 ---------------86------- France----------France
22-----------13.3---------------54 -------Saudi Arabia----Saudi Arabia
23-----------13.2---------------65-------Germany--------Germany
24-----------13-----------------51--------Canada---------Canada
25-----------12.3---------------44 -------United States--United States
Retrieved from: http://www.forbes.com/lists/2009/10/billionaires-2009-richest-people_The-Worlds-Billionaires_Rank.html