How to read and Understand Financial Statements

Some Basic Questions on How to read and Understand Financial Statements

Why Financial Statements are Prepared?
Who are Various Stakeholders of Financial Statements
What are the Stakes of Various Stakeholders?
Do Financial Statements Really Hold Some Value?
Are Financial Statements User Friendly?
Who are Shareholders? Do They Really Understand Financial Statements
Is Financial Reporting Standards Really Making Financial Statements Easy for Understanding & Use for Shareholders?
Can a Common Shareholders Really Analyze the Financial Information Contained in Financial Statements?
How Financial Statements Can be Made User Friendly?
Are Financial Managers Really Interested in Preparing Financial Statements in User Friendly Manner?

Financial statements – components
Statement of financial position
A financial statement of the business as at a specific point in time
Reports at a specific point in time where the money invested in the business came from and how it is currently invested
Financial statements –Statement of Position
Financial statements – Income Statement

Revenues and gains that enhance the company’s assets from the operations of the company
Financial statements – Income Statement

Is Movement in Share Prices are Reflection of Financial Position of Companies?
Do Shareholder really get benefited with Last Year Financial Information Reported in Financial Statements?
What is the level of Trust of a Common Shareholder on Reported Financial Information in Financial Statements?
Can Reported Information in Financial Statements be Effectively Used for Future Financial Decision making?
Who are the real beneficiaries of Financial Statements?
Who is actually holding the Reigns of Company?
What are the areas if Interest of Shareholders in Financial Statements?

What is the Role of Board of Directors in Companies?
How Powerful is Board in Companies Management?
To Whom Board Represents?
Are Board Members Paid Employees of Companies?
How Much Board Contributes to Effective Management of Companies?
Who is the real agent of Shareholder in Companies Board or Shareholders?
Who is Responsible for True & Fair View in Presentation of Financial Statements to Stakeholders?
In Major Corporate Frauds, Were Boards involved?
What are the areas of Interest of Board in Financial Statements?

Who are Various Lenders to Companies?
Who are Secured Lenders and How Powerful They are to Effect Financial Statements of Companies?
Who are Unsecured Lenders?
What are the Areas of Interest of Lenders in Financial Statements?
Do High level of Gearing Provides Effective Control to Lenders Over Financial Operation of Companies?
How Lenders Directly Effect Companies Financial Affairs?
What are the Various Key Performance Indicators (KPIs) for Lenders to Feel Their Lending Secured & Healthy Reflected in Financial Statements.
What are the Yellow Signs For Lenders Contained in Financial Statements Which May Jeopardize Their Interests in Companies.

Why Financial Statements are a Matter of Interest for Management
Management is Divided in Three Parts i.e. Top, Middle & Lower, What are various areas of focus of Three Levels of Management in Financial Statements?
Management While Being Responsible to Prepare Financial Statement can Effect the True & Fair View of Financial Statement?
What the Most Vulnerable Areas of Financial Statement Over Which Management can Effect.
What is Creative Accounting & How it can be Identified in Financial Statements?
What is Overtrading and how the Symptoms of Over Trading Can be Found in Financial Statements?
What is Window Dressing & How it can be found out in Financial Statements

In What Investors are more interested in before investment Profitability or Liquidity & Solvency?
How Capital Structure Influences Investors Decision?
If an Investor Decides to invest in a business despite of persistent losses, what may be his area of focus in Financial Statement?
What are various risk elements investors focuses while investing in highly profitable companies?
Do Investors intend to convert highly geared companies into leveraged one if they are profitable?
What is the difference in viewing Financial Statement between a Short Term Investor as Compared to one who is Strategically Interested in Maintaining Investments ?

A financial statement of the business as at a specific point in time
Reports at a specific point in time where the money invested in the business came from and how it is currently invested

What is the difference between a cash rich and cash deficient organization?
Are surplus cash reserves are a reflection of good financial management?
Cash less organizations have less control on short term decision making then cash rich organizations?
Why some organizations intend to become cash rich?
Does good cash flow management contribute in high profitability of organization?
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