Financial Statements Of The Companies

Financial Statements of the Companies

Introduction

The financial statements are the situation in which the company is, the economic and financial situation is shown, these are very important to be able to make decisions in the short and long term. Characteristics of the Financial Statements: Universal: The financial statements of a company must be easy to understand regardless in the country where they are, it is currently regulated by the internal norm of financial information, this rule will help shareholders and/or investors toknow a company, and be able to make decisions. Continuity: in order to have control of each year, and it must be one after another.

PERIODICITY: The financial statements must be from each period to be able to make a comparison, from one period to another. Clarity. The information must be clear and useful. You must meet the need for general public information. Applicability. The information should allow to evaluate, predict and compare the potentials related to cash flows. Purpose. Every financial statement is intended to provide information about administrative performance in the use of business resources. Comparison. With the information you can compare, analyze and evaluate other financial statements of companies, sectors or industries.

Developing

Consistency. The information must maintain coherence between the different items and the financial statements. Relevance. Financial statements must show the main aspects of company performance.

Reliability. They must be reliable regarding the financial reality of the company. The financial statements are: Financial Situation Statement (General Balance). Comprehensive results status. (profit and losses). Cash flow status. State of change in net worth. In the balance sheet there is information on the financial situation of the company, which is why it also receives the name of the financial situation, this report is of a certain moment. 

In summary, the current situation of the company is clear and precisely, the heritage that has this: what it has (active), what must (passive), the assets, the capital, etc. The balance is the financial statement that shows you the information of the company’s financial situation until the day that is prepared;By this I mean that this report will find the assets, liabilities and accounting capital that the company has, but the day after the report this can be changed, for the operations carried out daily. It is important that the balance always this picture is to say that the total assets must be equivalent to the sum of total liabilities and net worth. 

If there was no equivalence this means that there is an error and the error must be sought, to be able to square. We will find a summary of the financial situation of a company at a specific time. Equality is found between assets, liabilities and assets, that is, what the company has (assets) and the debts or contributions of the owners or partners or aims to indicate the financial position of an economic entity on a given date. It is a photograph of the company at a time of time ". When making the calculation, the following must.

It is found as income, machinery and others, we have two types of assets. Current or circulating asset: they are the goods and rights that will be part of the company’s assets less than 12 months, they are those that are in constant rotation, these are characterized by having liquidity or becoming liquidity, the company can turn this asset into liquidity(effective), an example of current assets are securities, merchandise for sales, cash cash, etc. Non -current Assets: It is all that the company has the goods, machinery, equipment and real estate, rights that will be part of the company’s assets for period more than 12 months.

The liability: they are debt and obligations that the company has to cover its activities, it is part of the financing that it has. These are also classified as current (short -term debts) and non -current (long -term debts). The net assets: it is divided into their own funds and subsidies. The results status are details of tickets, expenses, profits and/or losses of a company in a given period, all these activities are products of the company’s operations and/or economic activities. It is also known as a state of gain and losses.

Operations from economic activities are found in summary during a certain period of a company. This result is obtained after subtracting from the company’s income the various expenses made such as other promissory notes, checks, interests, loans, among others, this year is carried out within a certain fiscal period. This document is elaborated by carefully the expenses, losses, profits and income. They are divided into several categories to obtain different results specifically two results: before and after applying taxes.

With this document we will know if the company is reaching its financial objectives, as well as we can know what its profitability is, and if we carry out an analysis of this we could know how much money it has earned for each Sun invested. The State is a specific period synthesis. This State allows us to understand the operational flows, investment and financing of the company more widely. The effective flow status provides a report of the variations and movements of troops and equivalents in a certain period. The information we have of the cash flows (amount of money that a company circulates). 

It will help us evaluate the ability to create company liquidity, effective or similar we can also find liquidity needs. With this information we can know with more details where the cash has come out and where the cash has been used. We must know the difference between getting money for an obligation (loan) that is not the same as having money from an economic contribution of the partners. The status of cash flows there are three: operation: main income of the company’s activity. Investment: These are payments that are made to acquire non -current assets and charges from sales or amortizations.

Financing: They are activity that directly influence capital size as well as loans. This financial statement we will find in detail contributions of partners as well as the distribution of profits obtained in a given period, the retained profits from previous periods are applied in this state. The company’s assets will be separately in this state. In this state, the difference between the total asset and the total liabilities will be determined, in the liability the contributions of the partners will be, and the accounting capital (heritage) and the share capital (contributions of the partners) will be, herewill better understand the difference between these.

The financial analysis is a study that is carried out to the financial statements of a company, for the analysis it is necessary to use the financial ratios, in the analysis the calculation and interpretation of these results are made. These results will serve us at the time of making short and long term projections, as well as in decision making. According to the author Lavalle Burguete, the financial analysis does not help study all the results of the company, so that we know each part of it, with this we will obtain a complete diagnosis of financial performance of the company. 

This study will allow us to know what the causes of the problem were and thus be able to take corrective actions. The objective of the financial analysis is to conclude with a diagnosis, through the studies carried out to the financial statements, this diagnosis should allow to make more assertive decisions to maintain the profitability of the company. The financial analysis can have access or be used by agents who are interested in participating in the company, taking into account this the agents are divided into: internal: these users can be the managers and/or the company manager who will use the diagnosisof financial analysis to improve company processes.

Rebuild plans, prevent risks or take advantage of opportunities. As well as being able to make improvements to current management. Generally administrators use financial analysis to learn about historical information and thus carry out future projections. External: These agents use the analysis of the analysis that is carried out to the company in this case the financial one, with this we will know the current situation in which the company is and the projection of the future. For example for an investor it is essential.

Other important external agents are: customers, suppliers, possible investors, regulators, tax authorities, credit entities, etc. To carry out the financial analysis, the accounting data of the company (financial statements) must becompany main. There are three concepts that must be informed in a financial analysis: profitability: it is the performance and/or benefit that the company obtains from using resources or making an investment, it is usually represented in percentages.

Liquidity: It is the company’s capacity to convert its circulating assets into cash or liquidity, in order to cover its short -term debts. Solvency: It is the possibility that a company has to cover all its debts in the long term or short. There are two methods to perform a financial analysis are those that we mentioned now: vertical: the financial statements of a period are analyzed. Horizontal: the study of the financial statements of two or more periods is carried out. This method compared equal States in consecutive periods. According to the author Lavalle Burguete in this method, homogeneous financial statements are compared in consecutive periods.

It can be seen if the financial results have been positive or negative, as well as we can identify the changes that have been presented in the company and determine the importance they have. This author considers that it is important to carry out this analysis using the financial statements of two or more years to compare and inform the changes of the activities and results, whether positive or negative, obtaining with this information that it deserves more attention to the relevant changes, when making the difference in accounts from year to year, we will find the variations of figures that exist. 

conclusion

This will allow us to make decisions, which seeks this type of analysis is the absolute or relative variation that has suffered the different accounts of the financial statements in a period with respect to another. This analysis is important to know whether grown or decreased in a given period. This method analyzes each account or group of accounts. It will serve as a reference at the time of conducting cash use or working capital. Shows the diagnosis of a management, since all changes, variations in accounts are reflex or result of the determinations that have been made in the company.

A base year must be pointed out in which the results were neither very good nor very bad, it is not convenient to choose a lousy year for the company, it would result in any period as very good, which would distort the analysis of business management. The selected periods must be similar in order to consider seasonality, the reasonable thing is to compare, quarter with quarter, as well as quarter II with quarter II. It is nothing more than the comparison of the amount from one year to another, from account to account, and thus we will obtain financial analysis as a result of previous decisions. For this analysis, the variation must have been determined first, then the trend is calculated, for better results you must consider 5 years.