Cash Flows Analysis and Financial Statements - Assignment Example

Since the employees require stability of tenure, they would not want a situation whereby the company doesn’t guarantee their jobs. The management is interested in this information since it would want to know its performance and review the weak points which need to be improved. The information is important to the management since it needs to provide periodic reports on the company’s performance. The potential investors need to evaluate whether the company is a good investment opportunity. Without proper information, the company could not be an attractive investment opportunity since it would lack transparency.

Eventually creditors and suppliers need to evaluate the financial information in order to find out whether this company is credit worth. They would want to find out whether they could extend credit facilities in terms of money or goods. Question 2: Most of the financial information is usually published in journals, magazines and annual reports. Some of these reports are usually given during the annual general meeting to the shareholders and potential investors. Other sources which can be utilized could include online sources such as the company websites or online journals and magazines such as www.

businessweekly.com. This information evaluates in a snapshot the riskiness of the company and whether it is advisable to invest in it. other analysts normally obtain this information in order to try and predict the future performance of the company either in the short or in the long term. Question 7: Ratio analysis was formulated to basically try and provide a synopsis of the company’s performance. Ratio analysis is obtained through dividing very important to the organization since it basically evaluates the company’s financial statements and provides recommendations.

Ratio analysis also tries to judge a company’s efficiency while locating the weaknesses and coming up with action plans. Ratios form a very important tool in terms of comparing different companies and their performance in the industry. Question 15: Managers tend to utilize the market value ratios in different manners such as in instances of potential mergers and acquisitions. These market value ratios such as price earnings ratio and book value ratio normally impact on the performance of management.

When these ratios are high, it indicates that the management is doing a good job while if they are low then the converse is true. The managers could affect these ratios in an indirect manner since these ratios depend on the perception of investors. Much of the impact on these ratios is usually from the outside world hence the impact of managers could be curtailed and limited. Question 16: This is not usually possible since the management usually have the ability to manipulate financial information to portray the company’s image in good light.

The seriousness of this practice usually ranges from interpreting accounting rules favorably to a situation of fraud. The function of auditors is to try as much as possible to prevent this practice leading to mis stated financial information. In some circumstances, the auditors are the ones who perpetrate this practice by deceiving the public in order to gain fame with the management of the client firm. QUESTION 25 (A) PROTEK COMPANY LIMITED COMMON SIZE INCOME