Producing financial information in business

This essay hasn't yet been marked by one of our teachers

You can view all our essays on Finance that have been Marked by Teachers

The first 200 words of this essay...

One of the key reasons for producing financial information in terms of the balance sheet, profit and loss account and cash flow statement, is to provide more information and details that can be used by the different stakeholders for making decisions in an organization. In order to do this effectively, accurate interpretation and assessment of account needs to be carried out. A technique for doing this is ratio analysis, providing a more meaningful picture of the performance of a business. The following is going to explain what the financial ratio is, how to use it and critically evaluate it as an accurate assessment.

"Ratio analysis is an examination of accounting data by relating one figure to another, this allow more meaningful interpretation of the data and the identification of trends and performance."(Marcouse, I Gillespie, A Martin, B Surridge M & Wall, N, 1999, P160) For instance, accountants express net profit as a percentage of net assets. Net profit, in this case, is a measure of performance, and net assets a measure of size. Thus, net profits as a percentage of net assets, is business performance in relation to the size. Generally, a large organization is likely to obtain more