Question

Based on the readings of Chapter 2 in "The Essentials of Finance and Budgeting," base your discussion response on the following discussion prompt:

"What are you seeing in the firm's financial statements embedded in the annual report you selected for the project, as well as articles on the firm’s financial or market trends? What are some specific actions your HR department may take to improve the company’s profitability, use the financial information found in the income statement, balance sheet statement and cash flow statment."

Answer 1

Well, there are three main factors:

It is required by law for tax purposes.

Financial reporting and analysis give investors, creditors, and other businesses an idea of the financial integrity and creditworthiness of your company.

Financial reporting software provides crucial information that you can use to make better business decisions – for example, whether you should open a new branch or not.

To further illustrate the importance of financial statement analysis, let’s dive into each of these three primary reasons a little more thoroughly.