Financial statement provides an overview of analyzing, classifying and interpretation of a company's financial performance over time, which should be reliable and relevant, useful by managers, investors and owners helps in making informed business decisions. The purpose of this research proposal is to inform and analyze the uses of balance sheet and income statements helps in making informed business decisions, which will begin with a summary of financial statements and helps to prove the current and future decision of business along with financial goals of management.
Business owners and managers require a critical understanding and knowledge concerning the uses of balance sheet and income statement which help determine their business's decision in maximizing profit and using their financial statement (Income statement and balance sheet statement) as part of annual report to stockholders. The financial statement offers the business owner the ability to predict and assess the future growth of the business and comparing with the past current performance. Company's accounting data are information regarded as a business organization whereas it is communicated, many stakeholders which included creditors, investors and governmental agencies enclose the need of such information to enable make informed business decision, and are generally referred to an end with pertaining decision that are supported by presence of reliable and accurate accounting information and data. (Victoria .S, 2010)
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The primary objective of this report is to inform and analyze the use of balance sheet and income statements which help determine the business in making decision and plan to differentiate various decisions which requires a critical understanding of achieving a successful plan in business that would be profitable and valuable in the business and aims to have an insight understanding concerning accounting principles, assumptions and theories as well as analyzing the tradeoff between income and balance sheet statement. The income statement summarize company sales earned and expenses which are incurred in the business that indicate company's profitability goals, while balance sheet statement show the business's financial position of a firm, usually months and years. Therefore the managers, staff from outside the business activity with direct and indirect financial interest in business are those who make informed business decision of a company. This report is investigated in general and different sources of data collected used in informed business decisions and as well as accounting practices (General Accepted Accounting Practice GAAP) which are associated with IFRS (International Financial Reporting Standards).
2.0 LITERATURE REVIEW
The aims and goals of companies are to earn profit in most efficient and effective possible way, and enable to review financial statement which encounter how much expenditure it cost the business to generate profits. Most companies use financial ratios as a benchmark system, focusing attention on making informed business decision and have the responsibility to maximize the monetary return of owners, employees, managers and stakeholders of the business than maximizing monetary return for an individual. (Walden University, 2010)
Critical backgrounds in financial accounting are useful in some area of interests, members of lawful companies use accounting information in antitrust cases, fraud and tax to determine agreement with government rule and regulation. Therefore bankers and investment brokers use accounting data in making their investment and other financial decisions. (Weygandt Kieso 1995)
With the aids of reporting on proprietor occupied assets in financial statements prescribed by some accounting standards, the financial reporting standard on this concept report a true and fair value, which is a responsibility of the directors and management to determine the fair value of assets for reporting the financial position, changes and performance. (Parker .D. 2007)
Most company's representatives like their standards setters in adopting accounting standards for financial reporting issues including General Accepted Accounting Practice (GAAP) because of professional auditing which is directed to the auditor rather than the lawmaking entities. The concept used in the preparation of financial statements (Income statement and Balance sheet) could be more suitably in the financial reporting standards (FRS). (GASB 2010)
SWOT analysis process analyzes the evaluation of a firm internally and factors from the firm's external business (opportunities and threats) which affect the business and formulating the optimum strategy. (Nuttapon Nimmanp Hatcharin, 2003)
3.0 PROBLEM STATEMENT
This paper discover and explore company's financial income and balance sheet statement which contain important information concerning risk capital of the business, provide return by various decisions and ability to pay out dividends, therefore the business owner require a flow of information that make informed business decision the success and failure of a business. (Block and Hirt, 2005)
Always on Time
Marked to Standard
Various decisions can be made by the business owner upon strategic and tactical decision which provides advantages and impact affecting long term and short term issues forecasting the business and falling in line with the international financial reporting standard requirement which could be so misleading when conflict with the financial statements objective set out in Framework. (Times Newspaper Limited, 2009)
Based on the research tropic the researcher analyze the two hypothesis (Null and Alternate) which are to be tested in the paper.
4.1 The null hypothesis
International financial reporting standard do not provide a true and fair value of a business's financial position.
The general accepted accounting practice (GAAP) requires manager to make general assumptions reporting the business performance
4.2 Alternative Hypothesis
International financial reporting standard provide a true and fair value of a business's financial position.
The general accepted accounting practice (GAAP) do not requires manager to make general assumptions reporting the business performance
5.0 RESEARCH METHODOLOGY
5.1 DATA COLLECTION
The researcher collects and evaluates this research proposal by both primary and secondary data which can be collected from different sources and company's financial statement used in analyzing financial tools and techniques to help make informed business's decision.
5.2 SAMPLE DESIGN
The researcher choose two companies (Camellia and Coca Cola Company) to perform the research proposal, analyzing their performance, aims to compare the analysis based on the performance and decision which the business should make in accordance from their financial income and balance sheet statement.
5.3 RESEARCH DESIGN
The researcher collected relevant literature review based on uses of balance sheet and income statement helps in making informed business decision and conduct a brief understanding on the tropic before proceeding on with the research work.
The researcher select two sample companies (Camellia and Coca Cola Company) and to analyze their past financial performance to make business decision for the future. This is done through both qualitative and quantitative analysis. The quantitative analysis includes ratio analysis, trend analysis, industry comparison analysis, comparative statement analysis and quantitative analysis done through SWOT analysis.
Company Overview 1
An amalgam of companies, whose international group activities include agriculture, horticulture, food storage, banking and financial services, distribution and engineering with over 70,000 employees worldwide and emphasis toward development which the management can take a long view. The company is required to set out a fair review of the report during the business group and a description of uncertainties and description of principal risks facing the group.
The aims of the company are to secure growth and development of the business in a suitable manner and to gain an attractive return on investment, having the responsibility of ensuring development, progressive growth and continuity.
The company's consolidated income and balance statement prepared in the report are analyzed in accordance with the IFRS (International Financial Reporting Standards) which are useful and helpful to various stakeholders / stockholders involved in the company. Therefore the consolidated financial and accounting statements are based on the historical cost method.
' Relevant: Consolidated income and balance statement show importance impact and difference in its business decision and helps various stockholder / stakeholders involved in the company to demonstrate prior expectations and to make changes regarding the current and future events.
' Reliable: The Company's consolidated income and balance sheet statement should be reliable, proven and present, verified by only truthful information.
COMPANY OVERVIEW 2
Coca Cola Company
A world's mineral biggest beverage companies in terms of sales volume and profit with over 92,800 employees' worldwide refreshing consumers with sparkling and brands, world's number one provide of sparkling beverage, ready to drink coffee, teas and juice. The company focuses on initiatives decisions that protect the environment, enhance economic development and conserve resources.
Their mission are to account for action and inactions, finding ways to solve risks problem, understanding the trends and focusing on business building value and assets for the future and to continue achieving suitable quality growth and development to satisfy consumer's needs and desires.
In accordance with the International Financial Reporting Standards (IFRS) the financial statement are useful and helpful to various stakeholders involved in the Coca cola Company, therefore such accounting consistent methods can be applied and are comparable by reporting the company's financial performance.
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5.4 DATA ANALYSIS
This analysis provide a meaningful advantages that help the business's owner to make decisions through the company's financial statement by various analysis to forecast and focus for the future, including the comparative income and balance sheet statement, trend analysis, and ratio analysis using two years financial statement comparison in accordance with the accounting standard and policy.
A business owner can make effective decision by use of ratio analysis which represents the effect of their performance on how profitable the business is, liquidity represent the ability of how the business can meet its short term financial obligation which can easily be converted into cash, and efficiency which determine the business's receivable and payable's ratio.
Business Decision by use of trend analysis which highlight the movement of a business's financial statement focusing for the future and help determine the business owner whether or not the business will be profitable and by use of comparative income and balance sheet statement which involve the business's financial statement comparison increasing or decrease in the trend movement. (Frank Wood & Alan Sangster, 2002)
SWOT analysis which investigates the strengths and weakness generated within the companies' internal factors, as well as the opportunities and threats which affect the external factors of the companies. (Nuttapon Nimmanp Hatcharin, 2003)
6.0 TIMESCALE AND BUDGET SCHEDULE
Problem definition and background of the study 1 month
Relevant Literature review 1 month
Data collection 20 days
Data Analysis 1.5 months
Interpretations and Findings 2 weeks
Suggestions and recommendations 1 week
Conclusion and project finalization 2 months
6.2 BUDGET SCHEDULE
Cash budget 1.5 months
Food and accommodation '5000
Print outs '350
Telephone bill '600
7.0 LIMITATIONS OF THE STUDY
' The researcher's report is constrained to Camellia and Coca Coal Company on uses of balance sheet and income statement helps in making informed business decision. Therefore data presented in this report are collected through primary and secondary sources.
' Time constraints within a period of 1.5 months for the researcher to present the proposed research report.
' The business owner might want to reveal the weakness of their business operation with the accounting policy, and with those of the accounting standard board to defend the fair value drafted by them which outcome a possible bias in an interview and questionnaire design.
Based on the data analysis, the researcher conclude that the financial statement can help the business to indicated significant effects which help to improve in making decision and budgeting for the future, Therefore the financial and managerial report might helps reveal some inconsistencies concerning a business's strategies before making decision which the business can meet its short term obligation and having the ability to pay off current and long term debts. With the aids of accounting reporting standard, company financial income and balance sheet statement report the concept of a true and fair value, which is a responsibility to the management and directors which determine the fair value of an asset's financial changes, performance and position.