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2.1 Introduction
Knowing the financial conditions of your business enterprise is very important. Such
knowledge can help you allocate resources and identifies areas requiring
development and problems that needs correction. The finance manager should
know how the business enterprise is doing financially. Is it growing contracting? Will
it be around for a long time? How profitable is each department, and what can be
done to improve the profitable picture? These question and others can be answered
if the finance managers understand corporate financial statement. On the
enterprises is doing financially, he cannot provide the needed financial leadership
and directions.
This chapter looks at the key financial statements from an external viewpoint.
Financial statements are they financial information outsider are very interested to
see.
ASSETS
A classified statement of financial position is generally break down assets into two
categories: current assets and non-current assets. Non-current assets are further
classified into long-term investments, property, plant, and equipment (plant assets),
intangible assets, and deferred charges. This breakdown aids in analysing the types
and liquidity of the assets held.
Current assets are assets expected to be converted into cash or used up within one
year or normal operating cycle of business, whichever is greater. (the operating
cycle is the time period between the purchase of inventory merchandise for resale
and the transfer