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SMU BBA Semester 4 Spring 2012 drive Solved Assignments

SMU BBA Semester 4 Spring 2012 drive Solved Assignments

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Published by Rajdeep Kumar
This is a paid service. If you want to buy the solved assignments & projects , please contact us at support@smuassignments.com. Or visit our website www.smuassignments.com
This is a paid service. If you want to buy the solved assignments & projects , please contact us at support@smuassignments.com. Or visit our website www.smuassignments.com

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Published by: Rajdeep Kumar on May 21, 2012
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11/27/2012

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Spring/Feb 2012BBA Semester 4BB0017 – Financial ReportingAssignment Set- 1 (30 Marks)Q1. Which stakeholders require financial reports and why?Classification of Users of Financial Statements
The various users of financial statements are classified and detailed as follows:Users of Accounting InformationAccounting reports are designed to meet the common information needs of most decisionmakers. These decisions include when to buy, hold or sell the enterprise shares. It assesses theability of the enterprise to pay its employees, determine distributable profits and regulate theactivities of the enterprise. Investors and lenders are the most obvious users of accountinginformation.a) Investors:b)Investors may be broadly classified as retail investors, high net worth individuals,Institutional investors both domestic and foreign. As chief provider of risk capital, investors arekeen to know both the return from their investments and the associated risk. Potential investorsneed information to judge prospects for their investments.Lenders:c)Banks, Financial Institutions and debenture holders are the main lenders and theyneed information about the financial stability of the borrower enterprise. They are interested ininformation that would enable them to determine whether their borrower has the capability torepay the loans along with the interest due on it. They also use the information for monitoringthe financial condition of the borrowers. They may stipulate certain restrictions (known ascovenants) such as upper limit on the total debt borrowed from all sources or ask for additionalsecurity etc. Short term lenders (trade creditors) who provide short term financial support needinformation to determine whether the amount owing to them will be paid when due and whetherthey should extend, maintain or restrict the flow of credit.Regulators, Rating Agencies and Security Analyst: Investors and creditors seek theassistance of information specialist in assessing prospective returns. Equity analyst, bondanalyst and credit rating agencies offer a wide range of information in the form of answeringqueries on television shows, providing trends in business newspapers on a particular stock,offer valuable information in seminars, discussion groups, meetings and interviews. Securityanalyst obtain valuable information including insider information by means of face-to-facemeetings with the company officials, visit their premises and make constant enquiry using e-mails, teleconference and video conference. Firms build a good rapport with such type ofinformation seekers to gain visibility in the market.
 
 
d) Management:e)Management needs information to review the firm’s short term solvency andlong term solvency. It has to ensure effective utilization of its resources, profitability in terms ofturnover and investment. It has to decide upon the course of action to be taken in future.Management may also be interested in acquiring other business which is undervalued. Whenmanagers receive a commission or bonus related to profit or other accounting measures, theyhave a natural interest in understanding how those numbers are computed. Further when facedwith a hostile takeover attempt, they communicate additional financial information with a view toboosting the firm’s stock price.Employees, Trade Union and Tax authorities:f)Employees are keen to know about the generalhealth of the organization in terms of stability and profitability. Current employees have a naturalinterest in the financial condition of the firm as their compensation will depend on the financialperformance of the firm. Potential employees may use financial information to find out the futureprospects of the firm. Trade unions use financial reports for negotiating wage package,declaration of bonus and other benefits. Tax authorities need information to assess the taxliability of the firm.Customers:g)Customers have an interest in the accounting information about the continuationof company especially when they have established a long term involvement with or aredependent on the company. For Eg. Car owners, buyers of white goods, electronic gadgets,depend on the manufacturer for warranty service support, continued supply of spare parts. Thesales of Matiz car was badly affected due to the abrupt closure of Daewoo Motors.Government and regulatory agencies:h)Government and the regulatory agencies requireinformation to obtain timely and correct information, to regulate the activities of the enterprise ifany. They seek information when tax laws need to be amended, to provide institutional supportto the lagging industries. The regulatory agencies use financial reports to take action against thefirm when appropriate returns are not filed in time or when the returns fails to provide true andfair position of the business or to take appropriate action against the firm when complaints / misappropriation are being lodged. Stock exchange has a legitimate interest in financial reportsof publicly held enterprise to ensure efficient operation of capital market.The Public:Brief List of Users of Financial StatementsEvery firm has a social responsibility. Firms depend on local economy to meettheir varied needs. They may get patronage from local government in the form of capitalsubsidy, cheap land or tax sops in the form of tax holidays for certain period of time. Prosperityof the enterprise may lead to prosperity of the economy both directly and indirectly. Growth insoftware industry in Bangalore, Karnataka State, led to boom in housing sector, educationsector, entertainment sector, travel sector and tourism sector in and around Bangalore.Published financial statement assist public by providing information about the trends and recentdevelopments of the firm.1. Existing equity investors and lenders, to monitor their investments and to evaluate theperformance of management.
 
 
2. Prospective equity investors and lenders, to decide whether or not to invest.3. Investment analysts, money managers, and stockbrokers, to make buy/sell/holdrecommendations to their clients.4. Rating agencies (such as Moody's, Standard & Poor's, and Dun & Bradstreet), to assigncredit ratings.5. Major customers and suppliers, to evaluate the financial strength and staying power of thecompany as a dependable resource for their business.6. Labor unions, to gauge how much of a pay increase a company is able to afford in upcominglabor negotiations.7. Boards of directors, to review the performance of management.8. Management to assess9. Corporate raiders, to seek hidden value in companies with under priced stock.10. Competitors, to benchmark their own financial results.11. Potential competitors, to assess how profitable it may be to enter an industry.12. Government agencies responsible for taxing, regulating, or investigating the company.13. Politicians, lobbyists, issue groups, consumer advocates, environmentalists, think tanks,foundations, media reporters, and others who are supporting or opposing any particular publicissue the company's actions affect.14. Actual or potential joint venture partners, franchisors or franchisees, and other businessinterests who need to know about the company and its financial situation.

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