A Quick History of Finances

Benefits of Financial Statements for Investors and Developers

Every business needs to have a financial statement. Cash flow statement, income statement and shareholders equity statement are all part of financial statement. All these play a role in developing strategies and estimation of success and failure. Even the smallest numbers on a balance sheet have a huge impact on every company. Assets tend to depreciate in value and a percentage has to get deducted on the revenues earned In order to make a report, businesses have to know how much the business is making. Investors and developers get to know how much the business is making by numbers such as profits before and after tax.

The tax rates of corporate are usually on the higher side. Higher profits means higher taxes. It can be astonishing how much profits owners make after paying taxes. Having the most accurate financial data helps companies avoid depletion of resources. Many companies fudge their financial records to avoid paying taxes to the government which can lead to imprisonment or paying heavy fines.

Accurate financial data is vital to avoid costly mistakes which can be prevented as soon as they are discovered. Illegal activities are detected by investors and developers when the number don’t add up. To solve any financial records that have errors, reconciliation talks have to held. The errors can be avoided by double checking records of ac out.

Additionally, an accurate financial statement builds trust between the organization and its investors and developers.

It shows that the cash they invest in your business is used wisely. When balance sheets show profits it is their joy. There are some large scale companies such as WorldCom and Enron that were closed because of fudging financial data This is why governments have become more strict rules concerning compliance and accounting. Investors and developers rely on cash brought in from all areas of the business to get paid. A cash flow statement is what enables them to know how much the business is spending and what assets have been purchased.

In order to improve payment cycles, financial data plays a major role. Outgoing payment such as daily wages and salaries has to be paid. Also, inventory has to be properly managed and stakeholder need to get their dividends. This cannot be done if the numbers are not correct. To increase sales and boost finances, a company needs financial data to know how much a company makes. Investors and developers rely on financial records to ensure profitability and safety of their investment. More importantly, there main concern is what they money was spent on and what their money is currently doing.

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