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FINANCIAL STATEMENTS
Importance
Uses
Principles of Preparation
Limitations
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POINTS TO BE COVERED


FINANCIAL STATEMENTS

What are they?


TYPES OF STATEMENTS


IMPORTANCE OF FINANCIAL STATEMENTS



USES OF FINANCIAL STATEMENTS



PRINCIPLES OF PREPARATION


LIMITATIONS



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FINANCIAL STATEMENTS
Abbas Sheikh Dawood-101
Siddharth Devnani-302
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
What are Financial Statements?
Financial Performance Analyzers


Language understandable by interested parties
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
TYPES OF STATEMENTS
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FACTORS CONNSIDERED BEFORE INVESTING
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EVALUATION METHODS

1.Ratio Analysis
2.
3.Cash Flow analysis
4.
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EVALUATION OF INVESTMENTS BY RATIO ANALYSIS
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IMPORTANCE
Bhavuk Chandak-103
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IMPORTANCE
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Shows how a business is

doing

Are very useful within the
organization for a
company's stockholders and Delete this graphic or
copy it and use it on
to its board of directors, its another page or in
managers and some another presentation.

employees, including
labour unions.



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IMPORTANCE TO MANAGERS


Among the many users Managers are

the most beneficial and frequent
users of financial statements
particularly those good in analyzing
and understanding the financial
statements.

Business Managers discover

problems in the statements and find
the action needed to be taken and
executes the actions planned.
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USES
Dharmendra Choudhary-104
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
USES OF FINANCIAL STATEMENTS
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Financial institution s (banks and other lending


companies) use them to decide whether to grant a

company with fresh working capital or extend debt
securities (such as a long-term bank loan or debentures)
to finance expansion and other significant expenditure
and other duties declared and paid by a company.


Media and the general public are also interested in

financial statements for a variety of reasons. For
example if any person wants to become a shareholder
in the company then the financial statements of the
company’s previous years will help the person in
checking the creditability of the company

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PRINCIPLES FOR PREPARING

Vaibhav Choudhary-301
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Economic Entity Assumption




The accountant keeps all the owner’s
personal transactions different from
the transactions of his business.
Monetary Unit Assumption



Any Economic activity taking place is
measured in U.S. dollars, and the
ones which can be expressed in U.S.
dollars are recorded.

accountants do not take into account
the effect of inflation on recorded
amounts.
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
Time Period Assumption
 According to this principle it is possible to
report the ongoing activities of a business in
relatively short, distinct time intervals such as
the five months ended June 30, 2009, or the 5
weeks ended June 1, 2009.



Cost Principle
 From an accountant's view point, the term
"cost" refers to the money spent (cash
equivalent or cash) when an item
was originally obtained, whether that purchase
happened 2 years ago or fifty years ago.



Full Disclosure Principle
 If certain information is important to an
investor or lender using the financial
statements, that information should be
disclosed within the statement or in the notes
to the statement.

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Going Concern Principle
 This accounting principle assumes that a
company will continue to exist long enough to
carry out its objectives and commitments and
will not liquidate in the foreseeable future.
Matching Principle

 The matching principle requires that expenses

be matched with revenues. For example, sales
commissions expense should be reported in the
period when the sales were made (and not
reported in the period when the commissions
were paid)
Revenue Recognition Principle

 Under the accrual basis of accounting (as

opposed to the cash basis of
accounting), revenues are recognized as soon as
a product is sold, and not when the money was
received.
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 Materiality
 Because of this basic accounting principle or
guideline, an accountant might be allowed to
violate another accounting principle if an
amount is insignificant. Professional judgment is
needed to decide whether an amount is
insignificant or immaterial.


 Conservatism
 If a situation arises where there are two
acceptable alternatives for reporting an item,
conservatism directs the accountant to choose
the alternative that will result in less net
income and/or less asset amount

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LIMITATIONS
Shruti P Bihani-201
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QUANTATIVE BUT NOT QUALATATIVE

1.
1.
1.
2.Quality of revenue
2.Latest
2.Human
3. Industry
Resource
3. Trends
4.Lack of innovation
4.Quality
5. & Reputation of
3. management
6.Poor Operational Strategies
4.Changes
5.
7. in Taste of
LIMITATIONS

8.Lack
the ofcustomer
6.Morale Technological
of employees
7. Development
5.
9.
8.Change in management
6.Opportunity
10.Risk
11.
Factors Cost
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REFERENCE TO CASE STUDY
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THANK YOU
Abbas Sheik Dawood-101
Siddharth Devnani-302
Bhavuk Chandak-103
Dharmendra Choudhary-104
Vaibhav Chaudhary-301
Shruti Bihani-201