Accounting for Managers - Assignment Example

To what extent should the financial reporting practices of public sector organizations differ from those used by companies in the private sector." First of all, in terms of accounting and related sciences we need to outline what exactly is the term that defines the financial reporting practices. This indeed is the measure that comprises of the numbers that are present in the different flows of a company or at distinct reported levels within it. It can also be adjudged as the basis for the two financial flows categories which are in essence present due to the division of each other which involves profit margin as well as the entity related with profit or revenue as one might put it in the first place. More importantly, financial ratios are there due to the level that is divided by a financial flow itself which could be in the form of price or in simple plain accounting practices, the earnings. On the contrary, the financial ratios are also possible due to the flow that goes on to divide the same by a level that comprises of the return on equity or the earnings itself with respect to the equity. Now when we talk about the differences between the public sector organizations and that of the private sector we need to outline the exact stakeholders and investors who have one claim or the other within the said company’s shares and assets. For this to happen, one should comprehend that public sector organizations are open to accountability and audit in front of one and all but the private sector concerns are more or less within the four walls of the company and their revenues, shares and assets are not disclosed that easily. In fact there is no provision whatsoever to discuss the liquidity basis and the like when the talk goes out loud of the financial reporting mechanisms related with the private sector organizations. In calculating financial ratios of a public or a private sector organization, one must fathom that the numerator or the denominator at any point in time might just be the ratio, remarked as the PEG ratio. This is quite true that in terms of financial ratios, the ratio analysis has got its due part in telling one and all about the whole category and as such the industry. On the other hand, there are a number of important pointers that one can pick with regards to the theory of ratios for that matter. Let us start with the financial ratios. These are the flags that in essence lay the foundation for showing those areas that can be remarked as the ones having strengths or weaknesses, both within the realms of the private and the public sector concerns. For this point in case, even more than one ratios can eventually be quite misleading, but when the same are combined with different knowledge that are available in the wake of an industry, ratio analysis can go a long way in discussing and indeed detailing about the said public or private sector organization. It is advisable that the trend analysis is made for a period of five years and nothing less should be allowed to ensure smooth working and better results within the related organization. There are different categories when we discuss the financial reporting practices within the public and private sector organizations. These are very important in decisions which can be sorted out so as to weigh in the financial figures and measures which evaluate the financial condition and prosperity levels of an entity or organization for that matter. These five categories are comprised of the liquidity ratios, leverage capital structure ratios, profitability ratios, turnover ratios and last but not the least capital market ratios. The questions that could be asked in the wake of the liquidity ratios comprise of whether a firm is able to meet its short term financial obligations whenever they are on time or fall due with a particular time frame. In such a case, two liquidity ratios are most helpful. One of these includes the current ratio which entails the use of currents assets that are divisible by the current liabilities and the second one, talks about the quick or acid test ratio where the current assets minus the inventories are divided by current liabilities. The leverage capital structure ratios question for the indication limits as to whether or not the firm has the ability to fulfill its long term commitments that it owes towards the debt holders. For this, the debt to equity analysis ratio is made use of which focuses on the total liabilities that are divided by total shareholders’ equity. The third category emphasizes its attention on the profitability ratios and questions the level of profits that are put out or generated by the company over a period of time. For this, the company has to look forward to three different profitability analysis ratios that include return on assets ratio where net income is divided by the total assets. The second sub part in the wake of an entity is that of the return on equity ratio where the net income is divided by total shareholders’ equity and lastly, the net profit margin where the net income is divisible by sales. The penultimate category is that of the turnover margins and it questions the efficiency of the company whilst its’ using up of the different assets that it has over a period of time. Indeed this is the most useful of the lot. In this, one has to see that a margin uses another measure in order to come to an end result. The asset turnover measure is calculated via the sales that are divided by average total assets. The capital market figures form up as the last category whereby the question for a public sector or private sector firm can be focused on the indication of a company’s ability to whether it can win the confidence of the stock market at a particular juncture of time or not. In this, the most significant aspect is that of the price earnings analysis ratio where this measure makes use of another figure so to speak. The earnings per share are calculated as the net income that is divided by number of common shares which are to date outstanding. The price earnings scale is the market price of common share which is divided by earnings per share. The financial reporting practices of the public sector organizations have to be accountable on the wider horizon as compared to the private concerns since there is a lot of difference between the two of them. This difference stems from the fact that both of these organizations have different limitations and constraints under which they work and hence they have various distinct authorities to which they are answerable. What this means is that the power which rules these organizations basically pave the way for the basic functioning of the public or private sector concerns. More than anything else, it is the primary demeanor of a public concern or a private for that matter which actually brings about all the difference in the first place. The stakeholders are directly answerable on the part of the public sector organizations when the dealing is with them in an organization of public sector. However as far as private sector organizations are concerned, there is a whole new and different ideology related with this segment. The private sector focuses more on the provision of profits and value for money as far as its stakeholders are concerned but the public sector organizations focus on the ‘doing’ part more than anything else. The public sector organizations present their annual and at times periodical or any fixed period budgets, expenditures, return on the investments done and so on and so forth to the public but the private sector is not liable to answer any such entity within its jurisdictional capacity. The public sector organizations give out their activities which they do as concerns to the financial basis but the best part about these activities and measures is that they are properly presented on the company’s website as well as the tax returns are filled by the said company to the excise and taxation department on an annual basis. The private sector organizations can run without these practices and thus they resort to all sorts of measures which they can carry out in the name of financial creativities and hence there is no stopping them as such. The public sector organizations thus differ from the private sector organizations in the fact that the former are more apparent and clear in their undertakings while the latter fall short on many counts so to speak. More than that these public sector concerns focus on providing the basic healthcare, education, vocational training, employment and other matters to the general public while the private entity is more focused and dedicated to its own selves. Thus the basic difference is indeed the telling blow in the wake of this whole discussion. As to how the reporting practices of fiscal measures differ from each other we find that there is a slight discrepancy in the whole equation. The public sector concerns take a broader look at the different stances which the government encloses with it where the profit returns are shared not only by that public sector concern but also the ones which come under the umbrella of the governmental jurisdiction. This means that a public sector organization which focuses more on an individual product say for instance sugar has to bear the brunt when cotton stocks start to accrue losses. The help and facilitation aspect thus has to be shared and the whole thing needs to be seen in the proper contexts before deciding who takes what share and what is left behind in the whole balancing act. The private sector organizations try their best to keep the investors and stakeholders happy and as such there are no reporting acts as such that usually happen in a public sector organization for that matter. Because of these very reasons, the financial reporting mechanisms and practices are pretty much not in line with each other and one can find many discrepancies to result from the very same. Not only that but there is a general feeling of being let down by the private sector organizations since they do not usually come up with proper reporting mannerisms and there are always some problems that arise for one reason or the other within their reporting regimes. However this does not apply to all the private sector organizations but the notion holds some ground in the wake of a generally accepted and acclaimed ideology towards them. Thus the perception holds more ground here than anything else. Financial reporting aspects need to be properly aligned so that there is a complete mesh between the different financial basis of the organization under discussion and also when we speak of the various other financial and otherwise litigations that the company has to look into every now and then. The financial aspects are something that needs to be touched upon at length more so due to the fact that these form the backbone of any organization both in the short term as well as in the long run. The economics of the organization is always an imperative tenet since it is the actual basis on which the organization stands and from where it withdraws its profits and estimates losses, i.e. if there are any. The debts and credits of the said organization are always studied in detail whenever there is a decision which is based and therefore made on the premise of the financial reporting aspects. The liquidity measures and reports are touched upon in entirety to foresee and predict the financial basis in a quick and effective manner. The assets and liabilities that accrue on the part of the public sector as well as the private sector organizations are made available to the stakeholders, which raise the point that there is a single point where the two of these meet. The disturbing aspects however are that the financial basis can really fall behind the expected mark if there are players within the financial and stock markets that eat the small investors and share holders. This has been seen in the ranks of the recent debacles that have been going on all around the world where large investors and stakeholders of repute have literally usurped the sums of small investors. Thus in a public sector organization there is always room for some sort of financial ambiguity which raises quite a few eye brows nonetheless. The need is to ascertain as to where the glitches have cropped up from in this equation and then to address the loopholes in an effective and efficient manner, a perspective in which there are more winners than losers in reality. Thus stock markets and financial centers need to play their active part so that there is a complete synchronization in the activities and measures of the related organizations, be it a public sector enterprise or one that hails from the private sector and is thus responsible and answerable to the private regimes. In the end, we need to discern the fact that indeed there are differences and quite a few between the public sector and private sector organizations when one speaks of the financial reporting practices and mechanisms. What is discussed above is just a mere touch point of the whole saga that is related with the ambiguities and doubts which are going on in the related ranks. The need is to find out the ways and means through which public and private sector organizations can collectively form a point of contact with each other and thus learn from the mistakes of either party. What this will do is to inculcate the much needed sound practice which must be there in the first place when one speaks of the public or private sector organizations. Proper financial schemas are significant to obtain since these can provide the basis for the incorporation of sound practices when the talk goes out loud of the financial reporting mechanisms and the related practices related with the public sector and the private sector firms. All said and done the public and private sector concerns can really facilitate the actual basis of the sound working methodologies as far as the financial reporting aspects are concerned. It is with the assistance of either of these or even in combination of the two that the result at the end could one be of success and accomplishment. A lot of apprehensions can be addressed if there are guidelines which are drafted by the people at the helm of these public sector and private sector organizations and more than that if there are sound mechanisms to carry out the very same within the adequate contexts. It is only some time ahead that we will see a change for the better happening within the regimes of the public and private sector organizations. BIBLIOGRAPHY HALACHMI, Arie. (1996). Organizational Performance and Measurement in the Public Sector: Toward Service, Effort and Accomplishment Reporting. Quorum Books KHOURY, Sarkis J. (1990). The Deregulation of the World Financial Markets: Myths, Realities, and Impact. Quorum Books MILLS, John R. (1998). The Power of Cash Flow Ratios. Journal of Accountancy Vol. 186 NASH, Jennifer. (2001). Bolstering Private Sector Environmental Management. Public Management Vol. 76 OSTERYOUNG, Jerome. (1992). Financial Ratios in Large Public and Small Private Firms. 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