Question

Let’s start with the basics. A company’s story is told primarily in three pieces of paper, the income statement (how is the company doing? How much in sales, how much in expenses and what’s the bottom line?) The cash flow statement (remember, the income statement is an accounting statement. The cash flow statement will show how much cash comes in and goes out of the company through what activities) and the balance sheet (it shows the company’s financial position for a certain date. For example on December 31, 2016 Company X has this much in assets, liabilities and net worth).

Now, I want you to take a look at a certain company and tell me what you see. Simply copy and paste this link https://www.sec.gov/ix?doc=/Archives/edgar/data/27996/000002799617000028/a2016123110-k.htm (Links to an external site.)Links to an external site.  in your browser, which shows the company’s financial statements. If you scroll down just a little, on the top of the filling you see a the title “item 6, selected financial data”. Click on that and it will take you to a page in the document that summarizes the company’s financial information for the last 5 years. Take a look at it and see if you can understand the development of this company. Seems hard? Not really. First understand what the company does and the rest comes easy to you. Read the business description, they are primarily in the business of creating bank checks. Now, does it sound like a booming industry when credit and debit transactions taking over the world and cash and check are becoming irrelevant? Now take a look at the same financial information and see if you can uncover some clues about this company’s performance over the years. Pay attention to revenue, debt, orders taken, etc.

The best part of the financial statement analysis is that the company is required to tell you by law how it has performed and why. Simply take a look at page 24 of the same document under “Executive Overview” and tell me what management is telling you about this company’s performance.

Don’t get confused. Small steps, ask questions if there are parts you don’t understand. What does the company do, what is your impression of its financial figures and what are the management’s explanations?

Answer 1

STEP 1

Generally a company's financial statements are in four pieces,

They are;

1)Profit or loss (or) income statement,shows the matters relating to profit or loss arising from actually expenses and incomes arised during particular financial period.

2)Balance sheet statement,shows financial position of the entity,

3)cash flow statement, shows flow of cash from operating activities,investing activities,and finally financing activities of the entity during financial period.

4)Notes to the accounts, shows detailed information regarding every item in the balance sheet during fincial year ended.

STEP 2

As per given information provided in your link about deluxe company ,here they had given their financial statements information and it's performance from 2012 to 2016 I.e overall 5 years performance in consolidated format,

Then how would we like to check it's performance is the first question in our mind, very simple

Here financial data shows revenue generation from 2012 to 2016 in % format it has been increased from year to year and selling administrative expenses are also form part of income statement ,so this is a part of income statement then it's results as net income from 2012 to 2016 it increases so company performance was good till now.

Next we have to observe balance sheet data , it has cash and cash equivalents and long term obligations it has some variation between these two items called return it is included in share capital and liabilities then assets and liabilities are tallied ,it's financial position observed through cash ,long term obligations and return from capital, so based on company financial data of balance sheet it's position is good available cash and normal debt and low risk return.

Next we have to observe cash flow statement , what is actually happend from flow of cash from operating activities and investing activities and financial activities , as per financial data of deluxe first we have to consider the net profit or net income as per income statement and then adjust items of changes in working capital in operating activities and adjusting investing and financing activities finally we will get cash balance from activities and then add opening cash and cash equivalents i.e last year closing cash and cash equivalents are taken as opening cash and cash equivalents ,finally we get closing cash and cash eaquivalents,

Next as per balance sheet items maintaining notes to accounts for each item in the balance sheet

STEP 3

Finally based on above financial statement report results management have to make a decision for the efficient performance of the entity in future by making analysis of those report of statements ,

Moreover, items to be analysed as

-Executive overview,

-consolidated results of operations , costs rtf,

-Cash flows , liquidity, other performances,

-off balance sheet agreements,contractual agreements from the clients ,risk returns rtf,

-Accounting policies followed I.e critical accounting policy procedures to be implemented .

STEP 4

Executives overview means analysis of company performance based on comparison between year to year performance of the company I.e comparison of its;

-Revenues ,

-Operating incomes,

-Risk returns,

-liquidity positions,

-Networth positions,

-Debt equity ratios ,

-Average return on networth or net assets,

These all above can be analysed by making ratio analysis process can be overviewed it's efficiency..

This is the overall companies financial statements and how to base for its performance results and comparisons and management decisions based on Executive overviews.