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FINANCIAL STATEMENTS
Importance Uses Principles of Preparation Limitations

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POINTS TO BE COVERED
FINANCIAL STATEMENTS  What are they?


TYPES OF STATEMENTS

IMPORTANCE OF FINANCIAL STATEMENTS

USES OF FINANCIAL STATEMENTS

PRINCIPLES OF PREPARATION

LIMITATIONS

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FINANCIAL STATEMENTS
Abbas Sheikh Dawood-101 Siddharth Devnani-302

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What are Financial Statements? Financial Performance Analyzers  Language understandable by interested parties

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TYPES OF STATEMENTS

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FACTORS CONNSIDERED BEFORE INVESTING

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EVALUATION METHODS

1.Ratio Analysis 2. 3.Cash Flow analysis 4.

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EVALUATION OF INVESTMENTS BY RATIO ANALYSIS

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IMPORTANCE
Bhavuk Chandak-103

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IMPORTANCE
Shows how a business is doing  Are very useful within the organization for a company's stockholders and to its board of directors, its managers and some employees, including labour unions.
  

Delete this graphic or copy it and use it on another page or in another presentation.

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IMPORTANCE TO MANAGERS

Among the many users Managers are the most beneficial and frequent users of financial statements particularly those good in analyzing and understanding the financial statements. Business Managers discover problems in the statements and find the action needed to be taken and executes the actions planned.

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USES
Dharmendra Choudhary-104

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USES OF FINANCIAL STATEMENTS

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Financial institution s (banks and other lending companies) use them to decide whether to grant a company with fresh working capital or extend debt securities (such as a long-term bank loan or debentures) to finance expansion and other significant expenditure and other duties declared and paid by a company.
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Media and the general public are also interested in financial statements for a variety of reasons. For example if any person wants to become a shareholder in the company then the financial statements of the company’s previous years will help the person in checking the creditability of the company

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PRINCIPLES FOR PREPARING
Vaibhav Choudhary-301

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Economic Entity Assumption

The accountant keeps all the owner’s personal transactions different from the transactions of his business. Any Economic activity taking place is measured in U.S. dollars, and the ones which can be expressed in U.S. dollars are recorded. accountants do not take into account the effect of inflation on recorded amounts.

Monetary Unit Assumption

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Time Period Assumption

According to this principle it is possible to report the ongoing activities of a business in relatively short, distinct time intervals such as the five months ended June 30, 2009, or the 5 weeks ended June 1, 2009.


Cost Principle

From an accountant's view point, the term "cost" refers to the money spent (cash equivalent or cash) when an item was originally obtained, whether that purchase happened 2 years ago or fifty years ago.


Full Disclosure Principle

If certain information is important to an investor or lender using the financial statements, that information should be disclosed within the statement or in the notes to the statement.

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Going Concern Principle  This accounting principle assumes that a company will continue to exist long enough to carry out its objectives and commitments and will not liquidate in the foreseeable future. Matching Principle  The matching principle requires that expenses be matched with revenues. For example, sales commissions expense should be reported in the period when the sales were made (and not reported in the period when the commissions were paid) Revenue Recognition Principle  Under the accrual basis of accounting (as opposed to the cash basis of accounting), revenues are recognized as soon as a product is sold, and not when the money was received.

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Materiality  Because of this basic accounting principle or guideline, an accountant might be allowed to violate another accounting principle if an amount is insignificant. Professional judgment is needed to decide whether an amount is insignificant or immaterial.

Conservatism  If a situation arises where there are two acceptable alternatives for reporting an item, conservatism directs the accountant to choose the alternative that will result in less net income and/or less asset amount

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LIMITATIONS
Shruti P Bihani-201

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QUANTATIVE BUT NOT QUALATATIVE

1. 1. 1. 2.Quality of revenue 2.Human Resource 2.Latest Industry 3. 3.Trends 4.Lack of innovation 4.Quality & Reputation of 5. 3.management Strategies 6.Poor Operational LIMITATIONS 4.Changes in Taste of 7. 5. 8.Lack of Technological 6.Morale of employees the customer 7.Development 5. 9. 8.Change in management 10.Risk Factors 6.Opportunity Cost
11.

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REFERENCE TO CASE STUDY

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THANK YOU
Abbas Sheik Dawood-101 Siddharth Devnani-302 Bhavuk Chandak-103 Dharmendra Choudhary-104 Vaibhav Chaudhary-301 Shruti Bihani-201

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