Question

What factors should be considerations for banks, nonprofit companies, and government sectors when analyzing financial statements?

Answer 1

Non Profit Companies - Since the company is not found for earn profit hence profit ratio is not usefule for this organization while analysing financial statement of the non profit companies.So while doing analysis analyst have to see have company have enough cash inflow for future operation and he has to check how much fund has raised and how much fund spent for activities. Is that any fund that are coming from one source that can put under risk to the non profit companies. finally they have to see is that non profit companies have ability to meet his obligation or not.

Bank : Bank take money from the depositor through Saving , Current account and lend this money to the borrower at higher rate from deposit amount. Their profit will be on spread between they pay the interest amount to the depositor and interest received from the borrower. While analyszing anaylst has to consider where the bank have minimal capital at every time so that bank solvency level will be maintained throughout the period. So we have to see where any defaulter during the period or not if any defaulter is there that mean that will effect bank profitibility during the period because bank source of earning is spread between interest amount paid and interest on loan received. So analysiz has to see interest risk , loan losses , credit risk and minimal capital.

Government Sectors - Government sectors are different from the private sector since they are formed for providing service to the public and their intention is not earn the profit. They formed for servce the public of the country. Financial report of public sectors entities should present information that is useful in evaluating an entity's financial performance during the accounting period and its financial condition at the end of the accounting period. Broadly public sector entities are expected to be accountable for the extent to which the entity peformed in accordance with its financial plan.