Financial Statements and Profits Essay

Wells Fargo shows a much higher profitability ratio than Samsung, with over 8X that of Samsung. This is to be expected as services are typically more profitable than hardware sales which operate on leaner margins. Wells Fargo also outperforms Samsung significantly on return on sales with over 25X better performance. This again is attributable to better margins on services than hardware. Wells Fargo has a much stronger return on equity than Samsung with a Dupont ratio over 5X higher than Samsung's. Samsung has a stronger financial leverage ratio than Wells Fargo with almost 20% lower ratio for Samsung. Samsung also has a much lower total asset turnover than Wells Fargo. This is attributable to the quick turnover of assets in the manufacturing industry compared to the slow turnover of assets in the financial services sector.

As the business environment grows and companies find new ways to expand into their respective - or even new – markets, it is important that reporting standards stay up to date with changes and continue to assist companies in providing their users with useful accounting information. Information is labelled as being useful when it meets the

Financial performance of the firm is the dependent variable of the study. Previous literature uses different measures of financial performance some of them advocate the use of accounting measures of financial performance ( Earnhart and Lizal (2007); Alvarez et. al.(2007); and Sarkis and Cordeiro (2001)) whereas some others (Berrone and Gomez- Meija (2009); Bush and Hoffmann (2011); Dowell, Hart and Yeung (2000) ) advocate the use of financial measures of financial performance. The present study uses Return on Assets (ROA), Return on equity (ROE), Return on Investment (ROI) and Stock Returns to measure the financial performance of the firm. The stock returns data is taken from (CRSP) Center for Research in Security Prices (University of

The accounting system we use today started in Venice in renaissance period over 520 years ago. The trade business increased hugely during this time and all the financial recordings had to be written down to help people see how their business is doing. During that time in 1494 the first book about was published in accounting by Luca Paciolli and was called “The Collected Knowledge of Arithmetic, Geometry, Proportion and Proportionality”. He was called “The father of Accounting” and most of his described principles have been used up until this day.

Thus, it was seen as necessary to maintain the integrity of the profession of accounting as

1. What was the Kanthal president, Ridderstråle, attempting to accomplish with the Account Management System? Are these sensible goals?

In order to take a close look into various financial statement users’ behaviour, two theories or concepts should be outlined here:

The balance sheet and Income statement are the most important financial statements of the company that help conduct current analysis of company and evaluate its trends overtime. The balance sheet represents the company snapshots of its financial position on the last days of accounting period. Apple balance sheets, which represent a snapshot of its ending balances in asset, liability and equity account as of the date stated on the report, are changes each year from 2003 to 2014. On the other hand, the income statement shows its financial performance over 2003 to 2014. Apple basically ends its accounting period in September. Most of the long-term debts are in the form of the bonds. According to appleinsider.com, Apple recently issues a new euro bond worth about $2.26 billion with a maturity date on January 17, 2024 and coupon rate of 1.375% payable annually. The first payment will occur on January 17, 2016. Moody’s recently assigned a rating of Aa to Apple Inc. 's senior unsecured note issuance. Thus, Apple recent capital expenditure amount to 11,488 million according to morningstar.com. The analysis of financial statements is conduct to compare Apple with one of its closest rival Hewlett-Packard and twelve ratio were calculated. From table1 and chart1, the current ratio that determine the company ability to meet its short term obligation shows Apple’s current ratio is higher than that of Hewlett-Package from 2003 to 2014. That is, Apple is solvent than Hewlett Packard. Table

An income statement measures the performance over some period of time, usually a quarter or a year (Ross, Westerfield, Bradford (2014) p. 27). There are three aspects of an income statement that a financial manager needs to keep in mind when analyzing the numbers; GAAP, cash versus noncash item, and time and costs. GAAP will show revenue when it accrues. The general rule is to recognize revenue when the earnings process is virtually complete and the value of an exchanges of goods or services is known or can be reliably determined (Ross, Westerfield, Bradford (2014) p. 28). As some production costs of items produced are made on credit, the revenue on that item will not be recognized until the sale of that item occurs. Any other costs incurred in assembling that product will also not be recognized until the time of its sale. With this situation occurring, the income statement might not be able to represent all the actual cash flows during the particular period being evaluated.

Unlike here in the United States., financial statements of foreign companies are not always readily accessible. Most importantly, it is often not in English. However, an analyst or any interested party can always obtain a convenience translation of financial statements either through pay-database-services or by requesting it directly from the companies. Of course, different currency is also a concern. Yet, it can easily overcome by converting and translating previous years’ balances as well as current year’s balances (and line items) at current year currency exchange rate; this helps eliminating distortion and translation adjustments. Nevertheless, some other serious concerns such as terminologies discrepancies, general accepted accounting principles (GAAP) differences, and financial ratio analysis may still arise when analyzing “translated” foreign financial statements (Doupnik & Perera, 2012) .

Organisations have adopted integrated reporting to strengthen the communication of their overall performance to internal and external stakeholders. Consumers are becoming increasingly aware of the environmental and social impact corporations are having on the planet. As a result of the conscious consumer the types of information reported by entities in their annual reports and media releases are becoming more focused on portraying a green image. This change in the nature of reporting has given rise to the debate of if a company should be socially and environmentally responsible when they were designed to only think about profit. In addition to the idea that corporations should be reporting on a wider scope of their impact, there has been discussions on the regulation of the reporting of non-financial performance and if this information have the same qualitative characteristics that the financial information is required to follow.

Financial Statements basically show the historical performance or record of the company at some previous point of time. By the time when financial statements are made public, changes are many economical areas such as market conditions, currency exchange rate and inflations can change the values of assets and liabilities. In this case there often exist discrepancies between book value of assets and their market values.

The Purpose of Financial Statements The financial statements of a business are used to provide information about the status of the business, set performance targets and impose restrictions on the managers of the firm as well as provide an easier method for financial planning. The financial statements consist of the Profit and Loss Account, Balance Sheet and the Cash Flow Statement. There are four areas of information, which we can collect from a company's financial statements. They are: Ÿ

Earnings and profit are related, but not exactly the same. They are different in the terms of how they are calculated. Earnings and profit calculations are often used to determine the financial health of a business. They are typically used in reporting business income to tax authorities as well. New business owners usually make mistakes, they want to see the large number of sales on financial statements, if the number of sales is high they think they operate good, but they should actually look at how much they are profiting.

The Framework is also of value to auditors, and the users of financial statements, and more generally help interested parties to understand the IASB’s approach to the formulation of an accounting standard. The content of the Framework can be summarised as follows: • Identifying the objective of financial statements • The reporting entity (to be issued) • Identifying the parties that use financial statements • The qualitative characteristics that make financial statements useful • The remaining text of the old Framework dealing with elements of financial statements: assets, liabilities equity income and expenses and