Annual report analysis of Kotak Mahindra Bank Limited
Financial statements provide an overview of a business' financial condition in both short and long term. They help in understanding the past performance of the company and making future predictions about the company. It thus helps us to look beyond the profit figures.
There are 3 basic financial statements. They are:-
Income Statement
Balance Sheet &
Cash Flow Statement
Purpose of financial statements
"The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions."[Financial statements should be understandable, relevant, reliable and comparable. Reported assets, liabilities and equity are directly related to an organization's financial position. Reported income and expenses are directly related to an organization's financial performance.
Financial statements are intended to be understandable by readers who have "a reasonable knowledge of business and economic activities and accounting and who are willing to study the information diligently."
Owners and managers require financial statements to make important business decisions that affect its continued operations. Financial analysis is then performed on these statements to provide management with a more detailed understanding of the figures. These statements are also used as part of management's annual report to the stockholders.
Employees also need these reports in making collective bargaining agreements (CBA) with the management, in the case of labor unions or for individuals in discussing their compensation, promotion and rankings.
2. External Users: are potential investors, banks, government agencies and other parties who are outside the business but need financial information about the business for a diverse number of reasons.
Prospective investors make use of financial statements to assess the viability of investing in a business. Financial analyses are often used by investors and is prepared by professionals (financial analysts), thus providing them with the basis in making investment decisions.
Financial institutions (banks and other lending companies) use them to decide whether to grant a company with fresh working capital or extend debt securities (such as a long-term bank loan or debentures) to finance expansion and other significant expenditures.
Government entities (tax authorities) need financial statements to ascertain the propriety and accuracy of taxes and other duties declared and paid by a company.
Media and the general public are also interested in financial statements for a variety of reasons.
To entice new investors, most companies assemble their financial statements on fine paper with pleasing graphics and photos in an annual report to shareholders, attempting to capture the excitement and culture of the organization in a "marketing brochure" of sorts.
The objective of financial reporting/statements is to provide information about the reporting entity’s financial performance and financial position that is useful to a wide range of users for assessing the stewardship of the entity’s management and for making economic decisions.
Financial records are very important aspects to any corporation and making sure the records are accurate is essential. Determining how a corporation is going to do is a guess but it is based on previous year's financial statements and that is a reason finical records are so important. Making a profit is a goal for any corporation.
The annual report or 10-K of a company is a useful source of information for many agents outside of the corporation. Shareholder’s can view the contents of an annual report to get a more comprehensive idea of what the company is built upon. Additionally, annual reports show a company’s progress over the past financial periods and give a detailed breakdown of company investing and operations. The 10-K and all related documents are easily accessible on a company’s website for the public to view. i
According to the conceptual framework, the potential users of financial statements are investors, creditors, suppliers, employees, customers, governments and agencies, and the general public (Financial Accounting Standards Board, 2006). The primary users are investors, creditors, and those who advise them. It goes on to define the criteria that make up each potential user, as well as, the limitations of financial reporting. The FASB explicitly states that financial reporting is “but one source of information needed by those who make investment, credit, and similar resource allocation decisions. Users also need to consider pertinent information from other sources, and be aware of the characteristics and limitations of the information in them” (Financial Accounting Standards Board, 2006). With this in mind, it is still particularly difficult to determine whom the financials should be catered towards and what level of prudence is necessary for quality judgment.
...e an income statement needs to be looked at to show if the business is making a profit and if the expenses are too high or what has change in revenue from year to year. This is just an example of many other sources need to be looked at before deciding on the financial position of the entity.
Thesis: Businesses deem financing necessary when they are just beginning, expanding, or recovering; Debt financing and equity financning have many advantages and disadvantages but also change the entire accounting method that is to be considered while running the business.
A financial statement that summarizes the revenues, costs and expenses incurred during a specific period of time - usually a fiscal quarter or year. These records provide informat...
The Purpose of Financial Statements The financial statements of a business are used to provide information about the status of the business, set performance targets and impose restrictions on the managers of the firm as well as provide an easier method for financial planning. The financial statements consist of the Profit and Loss Account, Balance Sheet and the Cash Flow Statement. There are four areas of information, which we can collect from a company's financial statements. They are: Ÿ Profitability - This information comes from the Profit and Loss account. Were we can compare this year's profit with the previous years.
Preparing general-purpose financial statements can be simple or complex depending on the size of the company. Some statements need footnote disclosures while other can be presented without any. Details like this generally depend on the purpose of the financial statements.
...l statements to understand where the company is and where it is going, is there to much debt for the company to make a profit? Can the company make it in a tough financial world? This is what people are looking for when they review financial statements.
For example, if your business is growing to the point that you need additional manufacturing space to keep pace with demand, external financing can help you get the funding you need to build your addition. External funding can also be used for making large capital equipment purchases to facilitate growth that the company cannot afford on its own
Internal sources of finance are finances discovered within the business. For example, profits can be reserved back to finance growth. On the other hand, the company can sell items it owns that are no longer required to free up money. External sources of finance are discovered exterior the business, for example from creditors.
A financial statement (or financial report) is a formal record of all the financial actions/activities and the position of a business venture, person, or any other entity. Pertinent fiscal information is presented in a very systematic and structured manner and in a form that is easy to comprehend. Data that are recorded in the financial statements are affected by Accounting Principles, Accounting Concepts and Conventions, Recorded facts and Personal Judgments. The essential qualities of any Financial Statements are-
Financial statement are purely technical, it gives us information about financial information which are presented in a structured manner.
Internal sources are the sources of information within the company, used to compile market research as a basis for marketing decisions (ITS Education Asia, 2005). In the internal sources, some of the funds are come from the owners themselves, and some of the funds are provided by the families and friends when the type of the business firms is sole trader or partnership. Besides, those funds can also be generated from the profits of the business. In the “owner’s capital”, it involves two several ways, they are the owner’s capital, profits, retained earnings, dividend policy, credit control, reducing inventories levels, delaying payment to trade payables, sale of stock and debt collection.