The Business Model Within The Annual Report

In accounting there is much to be learned, about the financial aspects of a business. In the past five weeks I have learned the importance of financial reports and how they relate to the success of an establishment. These reports may include balance sheets and income statements, which help accountants and the public grasp the overall financial condition of a company. The information in these reports is really significant to, managers, owners, employees, and investors. Managers of a business can take and deduce financial

A business model is an important and integral part of the business a strategy of any firm whether big or small. The way a business model is developed determines and indicates the values, ethics and principles on the lines of which the business at large will be operating. It also indicates how the business is going to function and covers various internal and external dimensions of a business and the organization as a whole.

Accounting is commonly described as the language of business. It is very important for all business owners to have very good understanding of their finances. Having the knowledge of your business finance, you will know where the money is going. Every business owner should have a good understanding of finance. To have a good understanding business owners needs to understand basic accounting steeps, how does accounting play a role in their business, how to define a financial statement and how the omission of any of these steps would affect the success of a business. Once you have an understanding of accounting/finance and the how it plays

What makes a large organization like Wal-Mart financially successful? One could say it is the result of outstanding personnel or perhaps a strong determination to succeed. These factors certainly contribute. However the key to financial success in organizations lies in good accounting. Since early civilization began, accounting has been an important part of our financial transactions. In today’s world our use of modern accounting systems and accurate financial statements are critical components that make modern organizations successful. To facilitate understanding of this point one must understand how

Some individuals assume that the usefulness of financial statements is to predict the future of a business with data from the past. Sometimes this can be true in respect for trends that have continued for many years, for at least the near future. The fact is financial

Among the tools required for every business to survive and thrive, the ability to maintain a regular self-examination holds an indispensable place. The size of the business in question is almost of no consequence, only the potential complexity of the self-examination changes. A prime tool for such self-examinations is the family of related financial reporting that has become nearly universal in western businesses: the income statement, the balance sheet, and the statement of cash flows. This trio of reports enables management and owners to carefully examine the holdings and liabilities of their business so they may make

Representations are faithful if there is a correspondence or agreement between the accounting measures or descriptions in the financial reports and the economic phenomena they purport to represent (FASB, 1980: 6; FASB, 2005: 3). The difference between reliability and a faithful representation is ambiguous. Since the attributes neutrality, completeness and substance of economic phenomena (substance over form) can be classified as qualities of faithful representation, reliability becomes redundant. Consequently, a point of attention is to discuss what exactly the notions reliability and faithful representation mean and what they do not mean (FASB, 2005: 2-3).In both frameworks neutrality is defined as free from bias. 'To that end, the common conceptual framework should not include conservatism or prudence among the desirable qualitative characteristics of accounting information. However the framework should note the continuing need to be careful in the face of uncertainty' (FASB, 2005: 3).

I agree with Kevin’s statement that financial statements provide only a partial look at the picture when valuing a company. While providing the financial data such as sales, expenses, gross profit, total assets and liabilities, and net worth it leaves out the internal influences that most influence the bottom line.

Net income is not a sufficient indicator of the financial health of an entity. It only serves as a basis of allocation of expenses from the revenues that are generated for a certain financial period. It involves “noncash expenses,” specifically “depreciation and amortization of intangible assets” that reduces its value, but have no effect on the net cash flows of the business. It also differs with cash flow under the context of timing of revenue and expense versus the actual “occurrence” of cash flows (Williams, et al.). There are other considerations that must be probed at, such as the procurement of funds from credit facilities, the ability to pay short-term and long-term financial obligations, distribution of annual dividends, cash inflow and outflow from operating, financing and investing activities. Along with the income statement, balance sheet and critical analysis of several factors, the use of cash flow statement of the company serves an important indicator of the financial health and continuous operations of the business.

These characteristics can enhance relevant and faithfully represented financial information. Comparability can help users find similarities and differences among events and conditions. Verifiability implies a consensus among different measurers. Timeliness is very important, if information is timely, it can help users to make a decision as soon as possible. Understandability is used to measure whether the financial information is categorized and presented in a clarified and concise way for users to understand easily. (IASB 2010)

Business models have a huge impact on how an organizations operate. It is crucial that an organization chose a business model before inception in order to succeed. Basically, business models have become the new basis of competition, replacing product features and benefits as the playing field on which companies emerge as dominant or laggards (Plantes, 2013).

Similarly, but more simply put, Rothaermel (2017) describes a business model as a strategy translation as to how the firm plans to make money. What is evident in looking at these as well as other definitions are that there does not seem to be one accepted definition with which business literature can agree. Saebi, Lien, and Foss (2016), in surveying business literature found twelve varying definitions for the term business model, of which there were 42 different components. Also of concern to these authors is that business models appear to be the hypothesis of a company’s management as to what their customers’ need and how it should be fulfilled in order to make money. Further espoused is that just as any hypothesis need adaptability to change agents, such as the external environment, business models need to have this same adaptability, and should be updated more frequently than they usually

“Business Modeling is often seen as process to rearrange the building blocks to an innovative business model. What people forget is that a business model is not just the building plan of your business but also should give answer to the question “Why should your business exist from a customer perspective?” So a business model is not just a building plan but also how you give meaning to your customers and your employees” ( blog- business model,2016).

As mentioned in the article, a good business model tells a good story. Effectively communicating an organization’s business model and strategy to all the members (employees) of the organization can enhance the company’s performance. By understanding where each individual stands and how they contribute to the value chain,

However, this paper chooses this definition as theoretical perspective of analysis for this paper subject to the following modifications: A business model is overall framework and philosophy by which a company (intends or) creates value in the market place through enhancement of its own combination of raw or in-put materials to create products (tangible and intangible including services), product packaging and systematic distribution in order to generate some or the best possible profit.