The Object Of Financial Statement Free-Samples for Students

Question: Discuss about the Financial Statements, its objects and key Methods of WYZ Athletic Supply Inc. Answer: Introduction This report has described about the Financial Statements, its objects and key methods of WYZ Athletic Supply Inc. for five years from 2016-2020. Financial statements are the companys records relating to financial activities. Financial statements include income statement, Balance sheet, Statement of retained earnings and cash flows (Investopedia.com, n.d). Financial statements must be easy to understand, must provide only relevant information, information must be trustworthy and the financial statements must be comparable with other companys financial statements (accounting-simplified.com, n.d). Financial statements provide information to users of financial statements regarding financial performance of an enterprise including any changes that has occurred during the reporting period so that they can take wise decisions are the main objectives of financial statements. Financial Statements must be prepared as per GAAP guidelines which is considered as standard practice across international borders. Generally accepted accounting principles (GAAP) is considered to be the benchmark which states about methods of presentation of financial statements and to maintain the continuity of information of financial statements. There are two methods for analyzing Financial statements: Through horizontal and vertical analysis: Horizontal Analysis Vertical Analysis In this, different reporting periods financial information can be compared. In this, every item in financial statements are measured as a percentage of gross sales and or percentage of total assets. It is also called as proportional analysis. Here, multiple periods financial information can be reviewed easily. Proportion of accounts of a single reporting period can be reviewed here. Through Ratio analysis: Ratio analysis is a quantitative concept that helps in analyzing the financial position of the company. There are many types of ratios such as liquidity ratios, solvency ratios, profitability ratios, activity ratios and leverage ratios etc. (Accountingtools.com, n.d) which describes different aspects of the companys performance. Companys financial wealth can be examined after doing comparisons with itself from its past results and/or comparing with industrys average. Mostly it can be observed that ratios calculated are within the limits prescribed by the industry but there are also many problems that are associated with the ratios that attracted attentions from the readers. For taxation, investing and financing purposes and also to bring correctness in financial statements, these are required to be audited by the auditing firms or by an independent accountant or by government agencies which help the users of financial statements in taking economic decisions (Investopedia.com, n.d). Further financial analysts can rely on audited financial statements to evaluate the companys performance and also to make estimations about the companys future stock price. Moreover, Annual report is the best resource where the overall performance of the company including its future goals and strategies are included. It also contains the financial statements. WYZ Athletic Supply Inc. prepared Financial statements for the period 2016-2020. Income statement and balance sheet of WYZ Athletic Supply Inc. reflects the following information: It showed how well the assets were used in generating profits. It also showed companys effective operations and expansions. Further, it also helped investors and creditors in many ways such as: Providing useful information about companys overall financial performance. Providing information on companys earnings, information on total assets and total debts, uses of cash and total amount of investments made by the company during 2016-2020. Further, preparation of Statements also helped them to identify whether to invest in the company or grant loan to the company. By comparing ratios of different companies it can be judged whether a company is financially viable or not. Analysis Following analysis have been drawn from the financial statements of WYZ Athletic Supply, Inc. from 2016-2020: Net sales or net revenue means an amount produced by the company after doing trade with the buyers. Therefore, WYZ Athletic Supply, Inc. shows an upward movement in net sales. Net income means companys total earnings that has arrived after subtracting total costs from net sales. Therefore, WYZ Athletic Supply, Inc. shows an upward trend in net income. Profitability analysis means doing an estimation of a proposed project in terms of profit or maximizing the productivity of the current project by the supervisors. Earnings per share of WYZ Athletic Supply, Inc. showing an increasing trend for the period 2016-20120. Profit margin ratio, return on equity and return on assets of WYZ Athletic Supply, Inc. are also increasing. WYZ Athletic Supply, Inc. are uses LIFO method for the inventory valuation which assumes assets which are acquired at last must be sold or disposed first. Inventory of this company is attractive because its gross profit ratio and inventory turnover ratio showing a positive sign. This company has higher current and acid test ratio which shows that there are better chances to pay off its short term liabilities in a reasonable time. Debt ratio and financial leverage ratio of WYZ are also not high which shows that assets are sufficient to meets its obligations. Lastly, the companys Interest coverage ratio is also high which shows that the company has ability to meet its interest payments regularly. Conclusion Following conclusions have been drawn from the financial statements of WYZ Athletic Supply, Inc. for the period 2016-2020: There are two reasons for the increment of the dividend. These are: Firstly, Companys net income is showing increasing trend for the period of 5 years. Secondly, Companys growth and expansion strategy decides to earn more and expend less which increases the availability of profits for the shareholders in form of dividends. Thus, it can be summed up by saying that WYZ Athletic Supply, Inc. was doing well in 5 years that is 2016-2020. References What is financial statement? (n.d). Retrieved on 28 April 2017. From https://www.investopedia.com/terms/f/financial-statements.asp#ixzz4fNtJA15n. The object of financial statement (n.d). Retrieved on 28 April 2017. Fromhttps://accounting-simplified.com/purpose-of-financial-statements.html Two key methods for analyzing financial statements (n.d). Retrieved on 28 April 2017. Fromhttps://www.accountingtools.com/financial-statement-analysis.