Aspects of a Companys View of Entitys Success - Essay Example

Company Accounts of Affiliation: Company Accounts Making profits and minimizing losses and costs is usually the aim of every organization or business entity that sets into business. The department required to work extremely towards the realization of the aims and objectives is usually the Human Resource Management department. This is because the department is involved in the particular workforce associated with production. Other than the Human Resource Department, finance also has an uphill task in ensuring that all the issues pertaining to finances and balancing how the organization performs in both its income and expenditure (Alexander, Britton and Jorissen, 2005). It is based on the above fundamental aspects that the progress of an organization can be determined. However, it is important to state that despite an entity’s human resource management playing a substantive role in realization of the entity’s goals and objectives, it is usually never included in the statement in the financial position as an assert relating to human resource in aspects such as staff training and development (Fraser and Ormiston, 2001). There are indeed various reason explaining such a perspective. First, it is important to understand what financial statements are, and what role they play in an entity. A financial statement simply means the representation of an entity’s financial position and performance, and is usually accompanied by management decision and analysis (Alexander, Britton and Jorissen, 2005). From an organization’s perspective, success is defined on two various aspects, the financial aspect and the non-financial aspect. The financial aspect from which a company views success is through the lowering of capital costs while observing an increase in profits and share price. This is essential information in financial statements as it determines whether an entity is actually making profits or losses (Liang, 2007). On the non-financial aspect of a company’s view of entity’s success, there is usually the aspect attributed to appropriate management. Proper and effective internal management contributes to elements such as growth through substantive by increasing an entity’s market share (Fraser and Ormiston, 2001). On the other hand, there is usually another perspective from which success can be viewed, based on the investors’ point of view. According to investors, is realized through an increase in transparency within an entity. This then provides the investors with appropriate information with regard to decision-making process and the satisfaction of the objectives of disclosures (Liang, 2007). In many occasions, staff trainings and developments are usually conducted in entities as a means of investments; however, such are never featured in the financial statement position. This is a very common occurrence due to one fundamental reason. In entities, there are always two types of assets; tangible assets and non-tangible assets. Staff training and development is a type of non-tangible asset and hence does not feature in the financial statement as in accounting standards, only a few of non-tangible assets are stated in a statement (Drake and Fabozzi, 2006). Despite the above being a common occurrence in financial statements, it is an unfortunate aspect that in instances in which the value non-tangible assets is higher than that of the tangible assets, and yet still remain unstated in the financial statements. In such instances, it is most likely that investors are deceived towards making their investment decisions in attribute to such alienations (Fraser and Ormiston, 2001). Financial statements remain some of the most effective tools of determination for making substantive decisions pertaining to investments as from the financial statements; one is able to establish an entity’s potential and ability, based on the profits and loss margins within the financial statements. Ideally, the financial statement is the key tool used by investors in making decisions as to whether to invest in a particular entity or not. However, there are certain instances in which the use of statements is a misleading approach to decision-making especially in matters pertaining to investments (Drake and Fabozzi, 2006). First, the most common of all the occurrences is that of the tangible and non-tangible assets. As it has been indicated above, there are certain forms of assets that in most cases are never included in the financial statements. One of the most common and frequently talked about is that of non-tangible assets such as a number of human resources assets. Based on the fact that such important information can be left out of the financial statement, it is therefore, evident that relying solely on the financial statements for decision-making purposes especially for investment reasons can therefore, be a very misleading (Fraser and Ormiston, 2001). This is ideally due to the fact that the financial statement would provide false information pertaining to the actual value in terms of profits and loss margins as well as the share value in an entity. Secondly, in some instances, it has been found out that different business management staffs do not provide accurate information pertaining to the actual status of the entity under their care. One element of substantive importance in business is the fact that investors are most attracted by honest and transparent status of an entity even if the business if making losses, other than providing false information that an entity is actually doing well when in reality the entity is struggling to stabilize its performance (Liang, 2007). In many occasions, different business managements fail to provide a transparent picture about the actual status of an entity to bring about a picture that the entity is well performing, when in the real sense the entity is a failure. This particular approach provides investors with wrong approach towards making a decision of investing in such an entity when in reality it is a wrong move. Considering the above two important reasons, it is evident why a potential investor would not rely solely on the financial information on the financial statements of a service-based entity in making a justified investment decision. It is an element of substantive importance that businesses operate in a manner that is both beneficial to the organizations, and to the society. In such a time in which the entire globe is facing challenges of climate change, an aspect contributed to by emissions from different organizations directly into the environment. Indeed, in one of the United Nations Global Compact principles require that all businesses should provide appropriate strategies and policies that would work to environmental degradation while enhancing sustainability and responsibility. This ideally shows that it is entirely the responsibility of any particular entity to behave most appropriately, especially in matters pertaining environmental responsibility. Voluntary disclosures are elements primarily outside the financial statements not required by GAAP and SEC rule (Chang, 2002). These are usually of six different types of voluntary disclosures, with the first five fundamentally included in the Special Committee’s on Financial Reporting’s comprehensive business report model. In the case of the sixth voluntary disclosure, it is usually that involving the intangible assets, which are indeed of increasing importance to entities and the investors. Discussion of voluntary disclosures within the financial statements is usually attributed to various benefits. First is that of enhancement of credibility and transparency. It is indeed true that credibility and transparency pay a significant role in determining the decision-making process for potential investors, and hence should be upheld at all instances within the entity (Liang, 2007). Various aspects are usually attributed towards enhancement of credibility and transparency in voluntary disclosures. These include the provision of more information, both good and bad, and ways in which to make such better, reduction of risks and elements of uncertainty, lowered capital cost, and rate of return, and the ability to influence more investors into the entity (Chang, 2002). One of the reasons why it is in order for an entity to disclose voluntarily aspects pertaining to its financial prospects is that investors are in certain instances attracted to confidential approach that an entity has against its poor performance. It is of substantive importance for an entity to provide the appropriate solution with regard to its financial prospects (Drake and Fabozzi, 2006), to provide potential investors with the opportunity of predicting such an entity’s economic future and elements such as how to reduce the capital costs (Liang, 2007). Another benefit associated with voluntary disclosure is that of prevention of information asymmetry. It is very important for any organization projecting success to have different levels of information between the management and the potential investors (Chang, 2002). Through a lowered level of information, potential investors have the opportunity of getting to know what goes on within the insides of management and make determinations as to whether such approaches are significance and importance to the particular company (Fraser and Ormiston, 2001). Voluntary disclosure also provides for an opportunity for the establishment of an innovative environment that would influence an increase in changing demand for information pertaining to a certain business, thereby expanding the perspective of voluntary disclosure. Additionally, such an environment provides for an opportunity for business systems to be adjusted in order to align them to the already changed business tactics. Other than innovation, voluntary disclosure provides for an opportunity to improve on the already existing systems into better working systems through invention (Drake and Fabozzi, 2006). The final benefit attributed to voluntary disclosure for a business entity is that different business organizations have different aspects to disclose and, therefore, it is appropriate if such information is disclosed in order to prevent instances of investors having to think for themselves based on certain matters as a result of an entity’s lack of disclosing such information. It may be that the information contained in the voluntary disclosure is ideally that which does a potential investor require in order to make a conclusive decision pertaining to whether to invest in the entity or not (Palepu, Bernard and Healy, 1996). It is therefore important that different companies with different aspects to disclose provide this basic information, to enable an investor make concrete decision (Chang, 2002). In a very competitive business environment, it is important for any company oriented towards success to develop various strategies and mechanisms that would provide a competitive advantage over the other competitors in terms of how issues are addressed (Liang, 2007). One of the fundamental aspects attributed towards the success of an organization is based on its social and environmental responsibility. In the case of SR, there are certain aspects that are both socially and environmentally significance in ensuring that the organization realizes success from its operations. Elements that affect both the environmental and social aspects of a business mainly targets the investors as well as the customers who benefit from the entity, and therefore, it is important that the different aspects that contribute towards an inappropriate working environment are mitigated to provide a conducive environment for the particular business to flourish (Fraser and Ormiston, 2001). First, it is stated that SR has in the past had complications in matters pertaining to its high-energy consumption during the manufacturing process and also increased emissions of certain products that are not environmentally friendly, which had already contributed towards the company receiving a fine over its poor disposal mechanisms. It is evident that the company had damaged one river that is situated next to the company’s working site, an aspect that contributed towards the imposition of fine against SR. This ideally means that for any potential investor with an already made decision of investing in SR, has certain socially and environmental aspects that he has to take care of in realizing success for the organization. First, is the aspect of developing an alternative energy source in order to reduce the high-energy consumption within the industry. This would work most appropriately in the emission of toxic substances from the production channels, to help in the reduction of environmental degradation by emission of less toxic substances (Palepu, Bernard and Healy, 1996). There is also the aspect of treatment of the waste products as every production facility must always have some unwanted materials realized after the acquisition of the target product. This would therefore, require that SR develops a treatment site from where all the waste products are first channeled before their final release into rivers or other sources. On the social perspective, SR’s potential investors could also work to develop policies that would to bring about sanity in the company such as an aspect addressing the ethical elements in the company, including of crucial issues pertaining to the social well-being of the society within which the industry operates (Palepu, Bernard and Healy, 1996). Through aspects of environmental responsibility, it is evident that SR will be able to provide one of the best working environments that are both socially and environmentally friendly. References Alexander, D., Britton, & A., Jorissen, A., 2005. "International Financial Reporting and Analysis", Second Edition Chang, P. (2002). Voluntary disclosures: benefits and costs analysis. Hoboken, N.J.: Hoboken. Drake, P., & Fabozzi, F. J. (2006). Analysis of financial statements (2nd ed.). Hoboken, N.J.: Wiley. Fraser, L. M., & Ormiston, A. (2001). Understanding financial statements (6th ed.). Upper Saddle River, N.J.: Prentice Hall. Liang, X. (2007). Disclosure decisions and search costs in the mutual fund industry. N.J.: Upper Saddle River,: . Palepu, K. G., Bernard, V. L., & Healy, P. M. (1996). Business analysis & valuation: using financial statements : text & cases. Cincinnati, Ohio: South-Western college Pub.. Read More