Task 2.

10
Comment why reporting financial performance is
important from the company’s point of view?

Financial reporting refers to the periodic production of business financial statements.

These financial statements include the balance sheet, income statement, and cash
flow statement. The balance sheet shows a moment in time snapshot of a company’s
financial health.

Without accurate financial reporting, management would have no idea of how

profitable, leveraged, liquid, nor how efficient is their business. They could not
determine if their business could weather another economic recession like the one
we are still experiencing, whether they are growing their business and doing so
profitably, or if they have the capacity to meet all current obligations for payroll,
utilities, and loan obligations, without running out of cash. Accurate financial
reporting is also one way a small business owner can have a control mechanism by
which any irregularities in the financial performance of the company can be brought
to the forefront.

Define the earnings per share?

It is the portion of a company's profit allocated to each outstanding share of common

stock. Earnings per share serves as an indicator of a company's profitability.

Calculated as:

What is it reflect about the company?

Company would be more efficient in using its capital to generate income and, while
all other things remain the same, would be a "better" company. Investors should also
be aware of earnings manipulation that will affect the quality of the earnings number.
It is also important not to rely on any one financial measure, but to use it in
conjunction with statement analysis and other measures.

Financial Reporting Kaplan publishing (2013/14)