Taylor Wimpey Plc Financial Statements - Coursework Example

Introduction Financial ments are considered as most important pieces of information released by any organization. Under the existing laws in most of the countries, public limited companies are required to publish their financial statements to their shareholders as well as to the public. The duly audited financial statements not only offer insight into the financial performance of the firm but also highlight key information about the products, markets and overall financial performance of the firm. The recent legislations and compliance with the laws such as Sarbanes Oxley and Corporate governance requirements, organizations have been made compliant with providing comprehensive information to all the stakeholders of the firm. This information is not just limited to the financial information provided usually in the accounts but also include the information about products, services, markets, performance in various markets, external challenges as well as a comprehensive review of overall financial performance of the firm.( Balmforth, et.al, 2007) There are various sections in financial statements in which different information is presented by the firm. The information varies from section to section and contains different information according to the relevant section. Potential investors as well as other stakeholders therefore need to follow a particular section in order to extract the required information about the products, services, markets as well as financial performance. This paper will consider the example of Taylor Wimpey Plc financial statements and will discuss as to how its financial statements of the firm are providing critical information about its products, markets and financial performance and how they can help increase the understanding of the same. Financial Statements & Annual Accounts Financial Statements are the statements which outline the overall financial performance of the firms and provide critical information about how firm has performed during a given period of time. Usually made for the period of one year, financial statements depict the overall picture of financial performance of the company and how it has performed during the given period. (Friedlob, & Plewa, 2006).  It is however critical to note that most of the public limited companies, required under the law to publish their audited financial statements, issue annual audited accounts which contains comprehensive information besides showing the financial statements of the firm. How the information presented in various sections of the financial statements helps to develop better understanding of the markets, products and financial performance of the firm is depicted below: Directors Report Directors Report is probably the most important documents to provide a critical insight into the non-financial information of the firm. It contains a detailed review of the overall performance of the firm, its markets, economic situation as well as other challenges faced by the firm during a given period of time.( Lee, 2006).  It is also critical to understand that a directors report provides the take of the senior management of the firm on how they believe firm has performed in its given markets and what prospects an organization holds for the future. It therefore critically outlines as to what the firm believe future will hold for the firm and how firm can actually tackle the challenges. Taylor Wimpey’s director report is divided into different sections with reviews from Chairman as well as Chief Executive Officer of the firm. This report provides a comprehensive introduction to the firm’s markets i.e. UK and Spain. Discussing the performance and overall market situation in UK, the report further outlines about the firm’s performance in different regions in UK. This report also indicates different macroeconomic variables which directly affected the organization during the year and may have a potential impact on the market in future. It also suggests as to how the market trends behaved and what the trajectory of the overall market trends were during the year.1 The report further provided an overview of the performance of the firm in each market and in product categories. For example, Directors’ Report outlines the planned sale of the North American business of the firm besides discussing how the firm has actually optimized its overall product offerings in both the UK as well as Spanish market. Chief Executive’s review outlined the cyclical nature of the UK market and how trends have actually showed up previously. The report comprehensively covers how external events and market behavior may directly or indirectly have an impact on the firm’s overall level of performance. Director’s report therefore provides a comprehensive review about two of the most important aspects of the business i.e. products as well as the markets. It also highlights as to how the top management of the firm view the viability of each product and the market and what future course of action has been planned to meet the challenges. As such, investors and anyone interested in understanding the markets and their dynamics would therefore find directors’ report including the reviews of the chairman as well as the Chief Executive Officer in understanding how markets actually performed. It may be relatively difficult to assess the overall dynamics of the market and understand their minute details however, directors’ report published in the annual accounts provide good information about the overall actual behavior of the firm’s market and top management’s understanding of the same. It is also important to note that the degree to which directors report section or management overview section of the annual accounts matters a lot. Some firms put relatively less information and do not elaborate on various diversified segments of the business and markets whereas some firms include comprehensive information. It is therefore critical to note that investors as well as other users of annual accounts need to determine their needs before they can find relevant information about the markets and products of the company.(Van Frederikslust, Ang, & Sudarsanam, 2008).  The directors reports therefore can serve as one of the most important sections in the annual accounts which can, to a large extent, can offer critical insight into the markets of the firm and how they performed. Financial Statements and Notes to the Accounts Probably the most important part of the annual accounts is the financial statements and notes to the accounts. Financial statements are divided into different parts and each statement provides relevant and critical information regarding the overall financial performance of the firm. It is also critical to understand that financial statements need to be evaluated by using some tools such as ratio and trend analysis. Trend analysis provides understanding regarding historical performance of the firm whereas the ratio analysis can offer insight into how firm has performed in terms of different financial indicators. These indicators can range from ascertaining gross and net profit margins to evaluating how much return on equity has been provided by the firm. Balance Sheet Balance Sheet gives the position of a firm’s assets, liabilities as well as its equity on a given point of time. Normally, firms give figures of current as well as previous year in order to help facilitate the investors to make easy comparisons. Balance Sheet of the firm can provide critical information in understanding how firms have acquired its assets, whether it used debt or equity to finance the purchase of assets, working capital used by the firm as well as whether the firm has been able to manage its current as well as long term assets.(Brigham. & Houston, 2007).  Balance Sheet of the firm can easily help understand the ability and strategies of Taylor Wimpey Plc to actually as to how it performed during 2011. Income Statement Income Statement is another financial statement which can help evaluate the firm’s profitability as well as sales achievements. It can offer a better understanding to an investor to understand whether the firm has been able to increase its revenue, control and reduce its costs as well as improve its profitability. Income Statement along with Balance Sheet of the firm forms the basis of financial ratio analysis also. Financial Ratio Analysis can offer very important insight into how the firm has actually performed historically, with respect to its competitors, industry as well as the economy as a whole. Financial statements therefore serve as the tool for performing ratio analysis.( Harrington, 2002).  Income statement of Taylor Wimpey Plc suggests that its revenue has increased as compared to 2010 and similarly its profitability has increased too. Notes to the Accounts Notes to the Accounts can also offer important insight into the financial performance of the firm. Notes to the account offer explanations of the various estimates and amounts appearing in the financial statements. Investors can therefore gain important insights as to what accounting policies have been used by the firm while preparing its financial statements. Notes can also offer clear explanation regarding how different estimates have been made and whether complete and clear disclosures are provided by the firm or not. Conclusion Annual accounts and financial statements of the firm are the most important source of information regarding the markets, products as well as financial performance of the firm. Combined, they provide management’s overview of the total affairs of the firm, what are management’s policies regarding managing its operations as well as the markets. An investor or anyone looking for the information regarding markets and products of the firm can easily get insight into how firm has performed. References 1. Balmforth, et.al, (2007) Evidence On UK Directors Compliance With Disclosure Timing Regulations, Journal Of Financial Regulation And Compliance, 15(4), Pp.381 – 393 2. Brigham, E. F., & Houston, J. F. (2007). Fundamentals Of Financial Management. Mason, Ohio, Thomson/South-Western. 3. Friedlob, G. T., & Plewa, F. J. (2006). Financial and Business Statements. Hauppauge, NY, Barrons Educational Series. 4. Harrington, D. R. (2002). Financial Analysis: Practical Tools For Making Effective Financial Decisions In Business. Mason, Ohio, Thomson Learning. 5. Lee, T. A. (2006). Financial Reporting And Corporate Governance. Chichester, England, John Wiley & Sons. 6. Van Frederikslust, R. A. I., Ang, J. S., & Sudarsanam, P. S. (2008). Corporate Governance and Corporate Finance: A European Perspective. London, Routledge. Read More