What Financial Statements to Use for share holders

For investment analysis purposes, the financial statements that are used are the balance sheet, the income statement and the cash flow statement. The statements of shareholders' equity and retained earnings, which are seldom presented, contain nice-to-know, but not critical, information, and are not used by financial analysts. A word of caution: there are those in the general investing public who tend to focus on just the income statement and the balance sheet, thereby relegating cash flow considerations to somewhat of a secondary status. That's a mistake; for now, simply make a permanent mental note that the cash flow statement contains critically important analytical data.

What Do Users of Private Company Financial Statements Want? Purpose This Executive Report summarizes a series of interviews with preparers of financial statements and commercial and investment bankers that sought to answer the question, what do users of private company financial statements want? It has been prepared with Financial Executives Internationals Committee on Private Companies for FEI members and others and has been sponsored by the NFIB Research Foundation. Executive Summary The following themes emerged from the interviews: Internal Management Internal managers receive financial and operating information for their businesses. This information is not in the format of full-disclosure, financial statements prepared according to generally accepted accounting principles (GAAP). Operating information is provided on both a weekly and a monthly basis. Bankers Banks want annual audited GAAP financial statements for accuracy and comparability, and they also want quarterly financial statements. Other financial information that may be provided includes: o Detailed aged payables, receivables and inventory. o Monthly loan covenant calculations (debt to tangible net worth and current ratio calculations). o Collateral reports, and o Quarterly cash flow coverage information. Data from financial statements are entered into computer models and databases to measure liquidity and monitor compliance with debt covenants. Investment Bankers Want audited annual GAAP financial statements for accuracy and comparability. Want supplemental information beyond GAAP, such as a history of capital

expenditures. A fair value appraisal will be required if a company is not liquid. This is not necessary for a financially strong company. Investors Want more information than is provided by financials prepared in accordance with GAAP. Are more interested in operating data than financial data. Consider trend lines and year-over-year comparisons to be important. Use of GAAP GAAP does not provide the detail needed by investors or even banks. Certain calculations are difficult and time consuming (Ex. FIN 46). Uses of Financial Statements to Creditors Financial statements provide vast amounts of useful information regarding a business, such as its cash position, debt level, sales performance and expenses. A business' creditors uses its financial statements in various ways to review and assess the business. By ensuring that its financial statements are accurate, a business can provide useful information to help expedite credit decisions. Each financial statement provides a creditor with a different set of data with which to make a decision about extending credit or to evaluate the credit-worthiness of an existing customer.

Why are financial statements useful to employees?

Employees. Employees and their representative groups are interested in information about the stability and profitability of their employers. They are also interested in information which enables them to assess the ability of the enterprise to provide remuneration, retirement benefits and employment opportunities.

Government financial statements

See also: Fund accounting The rules for the recording, measurement and presentation of government financial statements may be different from those required for business and even for non-profit organizations. They may use either of two accounting methods: accrual accounting, or cash accounting, or a combination of the two (OCBOA). A complete set of chart of accounts is also used that is substantially different from the chart of a profit-oriented business