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Benefits of Financial Statements for Investors and Developers

Every business needs to have a financial statement. They include balance sheets, cash flow statement, income statement and shareholders equity statement. All are essential in developing strategies that impact either the success or failure of any business. Any business is greatly affected by small digits in a balance sheet. If assets depreciate in value the amount has to be deducted in what the business brings. In order to make a report, businesses have to know how much the business is making. To know how much a business is progressing you have to know profits before and after taxes.

The It is worth noting that the tax rate of companies is high. Higher profits means higher taxes. If you don’t have a financial statement, it can be devastating how much you make after paying for taxes. Having the most accurate financial data helps companies avoid depletion of resources. Many companies fudge their financial records to avoid paying taxes to the government which can lead to imprisonment or paying heavy fines.

To detect mistakes at an early stage, it is essential to have financial records. Investors and developers can detect any illegal activities thorough inconsistency in numbers. Reconciliation talks helps in solving financial errors. The errors can be avoided by double checking records of ac out.

Additionally, an accurate financial statement builds trust between the organization and its investors and developers.

It is a sign that their investment is well taken care of. It can be devastating to find out that the balance sheet shows profits and later to find out that a company is hiding losses. Fudging of financial data can lead to closure of business, as it happened to large companies such as Enron and WorldChateau. Governments have imposed tough rules that govern accounting and compliance. Cash from every source of the business is what pays back investors and developers. With a cash flow statement, they are able to know if a company has enough funds to pay for its expenses and purchasing of assets.

In order to improve payment cycles, financial data plays a major role. Salaries and wages are outgoing payments that have to be made. Investors and shareholders need to be paid their dividends and also inventory needs to be managed. Mathematical calculations cannot be done with incorrect figures. To increase sales and boost finances, a company needs financial data to know how much a company makes. Investors and developers rely on financial records to ensure profitability and safety of their investment. The want to know how their money is spent and what it is being used for currently.

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