Account for decision maker Essay Example | Topics and Well Written Essays - 2750 words

Account for decision maker - Essay Example Interpretation of these statements is vital for a successful investment. The relation between the different elements of the financial statements is important to understand as it reflects the performance of the company and the management can take proper decision pertaining to any strategic change. The external and internal financial statements are prepared in order to fulfil a set of objectives. The external statements highlight the external reporting only and it is mostly used by the tax authorities, investors, suppliers, creditors and public. These statements are usually prepared at an interval of one year and the period is defined by the individual company or the accounting standards they follow. Internal financial statements are flexible in nature and have excellent analytical components. These reports are prepared for the internal use i.e. for the management and its employees. These statements are prepared weekly or even quarterly (Will, Subramanyam and Robert, 2001). For a layman financial statement of an organisation or financial institution is the only source of information pertaining to its financials. This financials are essential for the layman investors who try to decide whether the company is worth investing or not. The liquidity, profitability and solvency are checked by the investors however, for a layman it is difficult to analyze so he/she actually concentrates on the net profit and sales revenue of the company to assess its financial position. Thus, this investor has the opinion that these financial statements are accurate enough to analysis and take any investment decision. The financial statements have a number of components which are very important for a number of individuals. These individuals include company, shareholders, creditors, stakeholders and general public (Stickney, 1993). The components of the financial statement are described