Financial Reporting and Audit Report
The calculation of indicators is based on the balance sheet and profit and loss statement. There are two approaches to the calculation of indicators. There is a momentary one when the calculation is made based on balance sheet data at the end of the period and the calculation for the mean values over the analyzed period. The second option is preferable if, for example, a company makes significant payments at the end of the month. Using the average for the period of values of the settlement account allows it to eliminate the resulting distortion of the liquidity indicator. In process auditing, bookkeeping can also be used to determine the numbers.
Principles of Financial Accounting
The fundamental principles of accounting are a set of principles, concepts, and definitions that enable the identification, estimation, accounting, formation, and transfer of financial information in a clear, consistent, timely, and understandable manner. Accounting is a process of using fundamental principles that create helpful financial information. The purpose of financial statements is to provide information on the financial position, activities, and changes in the financial position of the bank, which can be helpful to a wide range of users when making critical economic decisions.
To effectively implement this process, it is necessary to consider the requirements for transferring financial information to interested persons. These requirements are usually divided into two categories – the requirements of internal users (bank management) and external users of financial information.
Internal users are interested in the information contained in the financial statements. However, they also have access to additional management and financial information that helps them fulfill their planning, decision-making, and control responsibilities.
External users are interested in information about the activities and indicators of the bank and changes in the financial situation, which can be helpful for a wide range of users when making economic decisions. Financial reports satisfy the everyday needs of most users.
Financial Strategy
The financial strategy covers all aspects of a corporation’s activities, including optimization of fixed and circulating assets, profit distribution, non-cash settlements, tax and pricing policies, and security policies. It is developed within the framework of a corporation’s strategic financial planning. It is focused on achieving the specified level of the main parameters of its activities: sales volume, cost price, profitability, financial stability, payment, and price competitiveness.
Financial Ratios and Indicators
The main requirement for the enterprise’s break-even operation in market relations conditions is economic and other activities that ensure profitability. The economic measures are aimed at reimbursing expenses by the received incomes and profit reception for the satisfaction of the economic and social needs of members of the collective and material interests of the proprietor. There are many indicators for engineers and architects to characterize the activity, including gross income, turnover, profit, costs, taxes, and other characteristics. For all types of enterprises, the leading financial indicators for engineers and architects of the organization and their activities are financial stability, liquidity, profitability, and business activity.
The indicator dynamics are taken into account, which not only determine the financial strength of the firm or its insolvency but also reveal the critical state of the organization’s finances to identify the accurate liquidity index. Sometimes, the liquidity indicator is low due to an increased demand for the industry’s products. Such an organization has high solvency since its capital consists of cash and short-term loans. The dynamics of the main financial indicators demonstrate that the situation looks worse if the organization has working capital only in the form of a large number of stock products, which are current assets.
Their transformation into capital requires a certain amount of time for implementation and the availability of the customer base. The enterprise’s main financial indicators, including liquidity, indicate the state of creditworthiness. The company’s assets must be sufficient to pay off short-term loans. In the best position, these values are approximately at the same level. If the enterprise has circulating assets that are much higher in value than short-term loans, this indicates an inefficient investment of money by the enterprise in current assets. If the amount of working capital is lower than the value of short-term loans, this shows the firm’s pending bankruptcy.
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