Thursday, September 20, 2012


Financial report (FR) give a glance what is the condition of a company to the management or public as well. Some managers take time to read FR or tend to ignore, rely on a Financial manager.

In case a new management take over a company, FR  including Balance Sheet (BS) and Profit &Loss (PL) Statement will tell in details rate of growth or down turn in the last few years.

How the company manage the Assets, we can see the structure or ratio between Fixed and Current Assets. And how the Assets financed, how big the ratio between Networth or Loan. The ratios among type of companies differ from one industries to another.

The important thing to understand is to see Fixed Assets are productive to increase income or which Assets who were non productive.

The next step is to compare 2 years or more period of BS or PL Statement as well.
BS will tell increase/decrease of Assets and where the source to finance the Assets, by Net Worth or utilized the income or borrow long/short time loan.

 By comparative analysis, we may see some unusual, irregularities figures to be take serious analysis in details why it is happened. Better off if Unit management solve the irregularities than become finding by Audit department of Head office.

To dig more details the usage of the capital, see the list of Current Assets, either the aging of Receivable, how much more than a year, should be clasified as Doubfull receivable. The same treatment to the list of Inventory account.

In PL Statement 2 (two) main factor should be analysis. First the main sources of income and how to increase it. Second is the main costs that may decreased to support the income. To improve the income and to decrease the expenses at the same time.

From above explanation, FR is not consumption for Finance and Accounting managers only but also important to all managers and Board of Director members. 

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