Impact of Financial Statement

1034 WordsMar 26, 20115 Pages
I. The impact of finance on financial statement 1. Basis financial statement The management of company can control the financial of company through financial statements because it gives detail in all kind of financial record to management. There are three financial statements (i.e. Profit and loss statement, balance sheet, and cash flow statement). Financial statements should be understandable, relevant, reliable and comparable. Profit and loss statement (income statement): it reports all incomes, expenses in order to calculate the profit of company in the period of time. It gives information for internal and external stakeholder whether company makes profit or lost in one specific period of time. Based on income statement, manager can…show more content…
What really drives financial performance is setting smart objectives based on clear goals, and then creating detailed action plans or strategies that will lead to the objectives being achieved. Being realistic is not setting the bar lower. It allows the company to assess their capabilities as well as the capabilities of the business. Set a goal that Trek can accomplish within the first quarter of the year, such as reach a higher ROCE than the industry. Secondly, Trek also needs to control their capital effectively by attracting investors in the market. Specifically, Trek Bicycle PLC needs to have their analysis of expected future market conditions is convincing and realistic. Additionally, the investor will be looking closely to see if the working capital needs, production capacity and personnel requirements Trek Bicycle PLC predict are consistent with the level of growth Trek Bicycle PLC forecast. Thirdly, in terms of debt, operating debt should be self-liquidating. The managers should use operating loans to finance profitable production activities only. They should repay the annual operating loan in full each year. They should set up all other debt, including operating debt carry-overs, over a long enough term to ensure the debt can repaid with projected net income. After calculating the debt/equity ratio of Trek
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