This paper is meant to give an informative view on how financial accounting is used to help small and large businesses make positive and safe financial decisions. It is designed to help small business owners without a vast knowledge or understanding of accounting or of financial reports achieves maximum growth. We will examine the importance of financial reports as well as being able to account for a company’s assets and spending. Through proper accounting and reporting companies have a better way of assimilating what areas can be improved by comparing the reports of prior years and evaluating the differences in what was done then and now. It helps to provide a guide as to what actions the company may want to take to in order to improve or hold its place in its industry.
Financial reports are a necessary tool used by investors and potential investors to see how a company functions and stands financially. It is a deciding factor in what and how much will an investor invest in a company. It is also used to analyze and assess a companies potential areas of growth as well as its areas of loss. It is also a way for a company to track its earnings and losses of past years. It can be used to asses the effect of company trends and see how they may have affected the company whether positive or negatively. Looking at the managers annual report helps to determine some of the reoccurring factors that have affected the financial statements and give clues on what can be done to avoid potentially dangerous financial events in the future. The reports also come in handy when having to refer back to companies financial statements when being audited. Financial reports can be also is used to determine what the company’s expected future shares will be sold at.
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