Contemporary Financial Statement

Comiskey & Mulford in 2002 supposed that contemporary financial statements of huge corporations are naturally complicated by lengthy additional cross-references as well ancillaries or footnotes. Although, these kinds of financial statements are useful to equity analyst as it constitutes the basis for recommendations to financial mangers decisions on either selling company shares of stocks, or buying company shares of stocks in the market. On the other hand, a financial statement analyses for creditors are essential basis for financial managers to decide on whether to permit credit to a customer or deny (Berger & Udell, 2003). In other words, careful analyses of financial statements would reveal potential profits, direction of cash flows, monetary status, as well as the likelihood of variations in monetary status (Comiskey & Mulford, 2002).

Lending Money to clients

Banks on the other hand, deals with lending money to clients mostly on financial statement loan, asset-based loan, and small business credit scoring loan. Literally, financial statement loans are advanced to clients based on the liquidity, profitability, and solvency ratios appearing on the two component papers which are the balance sheet and the income statement. Based on the same instrumentality, asset-based loans are granted, but, with a security value that is projected on the accounts receivable, inventory, and fixed assets. Credit scoring loans are quite complicated as it requires past records of loans made by the client (Berger & Udell, 2003).

Financial decisions and Corporate valuations

Consequently, financial decisions and corporate valuations in the real world are usually drawn and underpinned by the testimonial figures in a financial statement. This is because the financial statement according to Albrecht et al in 2002 after being prepared by account executives of companies are audited and as found sound will form the usual bundle doled out to bankers, suppliers, and investors to assess the economic strength and weaknesses of a company.

On the other hand, Jamie Pratt in 2003 supposed that a financial report contribute a vital part in speculative ventures, although primarily, the main concern is for stakeholders update on company financials’. For example, companies like Compass Group PLC, Toronto Dominion Bank, Harris Corp, Morgan Stanley, and Boeing Co, whose managers resolved to increase profit, thus, probably achieving economics of scale. This can be done by encouraging investors for additional capitalization. So, the managers will initiate the writing of a company financial statement to show the current economic status of the company. This financial statement will be made up of four collaborative papers such as balance sheet, income statement, statement of retained earnings, and statement of cash flows (Jamie Pratt, 2003).

Financial Statement 2

According to Kirkegaard this predicament was supported by Professor Robert N. Anthony in 1987 in the Harvard Business Review article which said that in reality, there are no fundamental accounting concepts established to guide the preparation of the commonly used financial statement. This was only in addition to the numberless attempts of experts to come up with a generally acceptable format that could be easily understood by readers of the same. But, it seems that the major barrier towards creation of a commonly acceptable format which is politics always prevailed. This is despite the efforts of the Financial Accounting Standards board to create the groundwork’s (Kirkegaard, 1997). So, in the midst of differences in fundamental accounting standards businesses have to go on and financial statements have to be prepared according to needs and preferences of various entities that could benefit from the financial statement as financial tool (Berger & Udell, 2003).

Financial Statement

Financial Statement

In 1997 Kirkegaard asserted that the absence of fundamental bookkeeping theories makes no one capable of appreciating financial statements. Various financial managers and company executives apparently interpret financial statements according to how they deduce figures that would serve them for making fiscal choices and management. Apparently, the current type of financial statements drawn up by companies turned out to be frustrating. The blame for the shortcoming almost always went back to the bookkeepers who seemed to be out of touch (Kirkegaard, 1997).