Financial Report On Financial Management

1594 Words Mar 5th, 2016 7 Pages
Nevertheless, besides the advantages as mentioned above, financial reports have a number of disadvantages. Firstly, the expensive cost of providing audited financial statement that meet requirements of IASB (International Accounting Standards Boards) is a common problem of a firm. Secondly, because financial statement based on a specific time or period, it is historical record of financial status of a firm so it has a little value in predicting and forecasting the future performance of this firm. For example, in a period of time a company has produced a good financial report might only because of a sudden increase in sale or gaining a big contract so the sales and net profit increase but after this period, the situation is different. Another disadvantage of financial statement is disclosure. When public company releases their financial report, some difficulties can be revealed to competitors so they can access to the financial health of a company or they can copy some techniques and strategies in financial management of a firm.

A financial statement made up of three components: the Income statement, the Balance sheet and the Statement of cash flows. Income statement (or known as Profit and Loss statement or Statement of Financial Performance) are made in order to measure the profitability of a firm over a period of time (Block et al 2016, p. 26) and based on accrual accounting method which shows the earning activities in a specific period and the ability to generate…
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