Can you help me understand this Accounting question?
Hello,This is a two part questions. First I will need the discussion question answer which will be below in bold, 250+ words APA format. For those response I will need three responses of at least 150 words each.There are three different categories of people who read financial statements – investors, financial analysts, and creditors. Choose one category and provide examples of the types of information the person would be interested in. Explain why each type of information may be important to the person.Part 2Student one:When I started my MBA I had little actual finance experience. At the time I did not realize this. My second class in my program was Managerial Analysis. When I hit that class it was very hard. The reason it was hard was because I had not dealt with the financial decision making process required for it. I learned there are many ways to slice a companies' financial pie. However, it is imperative to prepare them in correct processes because the stakeholders rely on an accurate assessment. This post will examine how the stakeholders of investors look at a financial statement, and what information they are looking for.The first question is how can we narrow down the term financial statements. The more specific terms to analyze are the income statement, cash flow statement, and the balance sheet. All three are like points on a triangle which work together to form the entire picture of how well a company is doing.So, what does an investor look for in these statements? Let's think about Shark Tank to answer this. When an inventor comes in with a product they need money to keep their product afloat. They present a case for what their product is, and how they make money off of it. The goal is to get the investors to agree to help finance their product for a share of the company. Sounds great. But, it doesn't always work out. As the investors are analyzing the product they are analyzing so much more. They are looking to see what the client base is, how much cash flow the company has, how they use that cash flow, and where the break even point is, etc. This is a real life version of the things which investors are actually analyzing on the financial statements. The investors need to know how stable their investment is. The more risky the investment is either they will not buy into the company, or they will insist on a higher portion of the company. So, the greater the risk, the greater the reward. While it may not be as glamorous as the TV show makes it out to be...When an investor analyzes a company financial statement, those are the things an investor is analyzing in the financial statements.Najjar, D. (2019, July 23). What Investors Want to See in Financial Statements. Retrieved March 9, 2020, from https://www.thebalancesmb.com/what-investors-want-...Student two:Financial statements are important because they communicate a company's conditions formally to interested outside parties. Financial statements are often viewed during financial reporting (monthly, quarterly, annually, etc.). Interested investors (and even creditors) can evaluate the conditions, successes, risks, and future expectations of a company, especially considering that law requires reporting and that specific facts be contained within financial reports (balance sheet, income sheet, and cash-flow sheet are major financial reports; Way & Seidel, 2019).Investors look for moving management commentary to help evaluate performance. Some investors find it hard to see how the balance sheet, income sheet, and cash-flow sheet fit together in a company, so they look for explanation for a better evaluation. Ultimately, investors look for linkage in the form of commentary between business strategies and the numbers, so numbers in financial reports are important and of interest to investors, but for quality analysis or truly useful reports, explanations are probably more important because they convey exactly what the numbers mean (Eastman & Tabone, n.d.).ReferencesEastman, H. & Tabone, M. C. (n.d.). Corporate performance: What do investors want to know. PWC. Retrieved from https://www.pwc.com/gx/en/services/audit-assurance...Way J. & Seidel, M. (2019). What is the importance of a company's financial statements? Chron.com. Retrieved from https://smallbusiness.chron.com/importance-company...Student three:Creditors use financial statements to have an idea of a business persona and the business integrity when they seek to establish new credit accounts or increase the value on their current credit accounts. The financial statements used by creditors are also used to see what tangible assets are owned by the consumer or business. Creditors are sometimes not interested in intangible assets. Other financial rules used can include profitability, cash flow, and repayment ability. Overall, the financial statements will show if one is credit worthy or poses as a risk. There are various financial statements analyst and creditors can look at. Some may include the balance sheet and the income sheet. Assets are favorable when the financial health of a business is evaluated for credit worthiness. Assets can be turned into cash or account receivables (Kranacher, 2011). Internal notes on financial statements can also tell creditors how a business operates and can also offer a context in which is easier to understand when the number amounts are looked for, mainly profits. Basically, more data on the financial sheets will develop a complete financial picture to the creditor.The integrity of having financial statements is critical to creditors. Without these reports, creditors may need to go somewhere else to seek out the financial history of an interested entity. Well experienced creditors should be able to see inconsistence and inaccuracies in financial statements. Creditors want to have the ‘full disclosure” and all the financial detail available when the interest is weighted either for or against a new applicant or business.In some cases, a creditor’s evaluation can become unrealistic when the information is limited. Some businesses may only have records that go back a few years where most creditors want to see records going back ten years or more. Either way, creditors also know they pose as risk when giving credit to a new business. Just because a business has good financial statements, doesn’t always mean they will always be able to ‘promise’ and pay bills on time when they become due.ReferencesKranacher, Mary-Jo. “Full Disclosure: All Investors Need to Know.” The CPA Journal 81.4 (2011): 80. Web.
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