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Financial Statement Analysis entails the use of accounting data. In terms of decision-making activities, the topic discusses the importance of accounting data. The accounting information enhances the stakeholders’ decisions.
Stakeholders
Student Association. It is important for the student association to evaluate and assess the accounting information (Wiborg14). Without the information, the school may withhold the release of funds to the student association. The information will show whether the school maximized the use of the school funds (Hauch 1). If the information shows the school squandered funds for avoidable expenses, the student association may petition for a revision of the school’s budget allocation policies. The students can use the accounting information as a basis for seeking additional budget allocation for the learning facilities’ improvements. Vividly, the student association can benefit from the decision-related information. Durham College. Durham College places importance on accounting information. Durham College and UOIT share buildings, parking lots. Consequently, information may indicate UOIT may close down. When this happens, Durham College may either transfer to another location or by UOIT’s building and parking lot share. If the financial report shows the school is generating high net profits, Durham College knows that both schools can continue using the buildings and sideways (Wiborg14). Clearly, the information will improve Durham College’s decisions.
Facility Members. To enhance their decisions, the facility members need accounting information. The facility members will use the information to negotiate for an increase or decrease in facility expenses. If the financial information shows the school is on the brink of bankruptcy, the members may increase their expense sharing (Wiborg14). Surly, the information will improve the facility members’ decisions. University Students at UOIT. It is important for the university students of UOIT to evaluate and assess the accounting information. The information will use information to persuade the school to allocate a bigger budget for school facility improvements. A high net profit picture will persuade the students to stop any tuition fee increases. Likewise, the students may agree to the school’s persistent demand for a 5 percent tuition fee increase (Wiborg14). Without a doubt, the students need the data. Community. When making decisions, the community puts importance on accounting information. Information showing the school generated favorable financial ratios will entice the community to apply for any vacant employee job. Likewise, the high net profit picture will persuade the community to stop any tuition fee increases. A net loss accounting information will persuade the community to enroll in another school. The accounting information will show whether the school is buying its supplies and other operating needs from the community’s stores or elsewhere. The community may petition the school to exclusively purchase all their school requirements from the community store (Wiborg14). Overall, the stakeholders need accounting information to enhance their decisions.
Financial Statement Analysis
Based on the table’s prior year data accounting information, the school performed financially better during 2013. The school’s return on assets ratio had favorably increased from 0.01 (2012) to 0.03 (2013). Likewise, the school’s return on net assets was higher during 2013. The 2012 ratio was 0.46. The 2013 ratio was 068. The 2013 ratio increased by 22 %. The two ratios show the school was able to favorably maximize the use of its assets and net assets to generate revenues. Similarly, the school’s 2013 current ratio is better than the 2012 ratio. The 2013 ratio, 0.67, is 0.17 percent higher than the 2012 ratio, 0.50. The school has enough current funds allocated for the payment of its currently maturing obligations. The best debt-to-net assets ratio is to have the same amount allocated to both debts and net assets. The 2013 ratio is 23.25. The 2012 ratio is only 84.80 times. Consequently, the company’s debt-to-net assets ratio for 2013 is 61.55 times better than the prior year’s ratio (Fridson 266). Further, the school’s 2013 net profit performance improved. The 2013 net profit ratio is 0.08. The 2012 net profit ratio is only 0.02. The 2013 net profit ratio performance is 0.06 % higher than the 2012 performance (Fridson 275). Clearly, the above ratios show the school is performing well.
Table. Financial Statement Ratios
Recommendations
There are several recommendations. The financial report should indicate the amounts allocated to school improvements. The financial report should include reports on the implementation of labor laws and environmental laws. The report should include a five-year forecast. The forecasted accounting information will guide the stakeholders’ future decisions. The forecasted information will show whether the school is planning to expand or close down within the next five years. To increase next year’s enrollment, the school should allocate a relevant advertising budget. To improve its current financial picture, the school should seek additional grants and donations. Undoubtedly, the recommendations will improve the school’s financial image.
Summarizing the above discussion, the financial statement helps the decision-makers. Overall, the school’s return on assets, return on net assets, and other ratios show the school performed financially better during 2013. In terms of the importance of the accounting information, the different stakeholders have different interests. Overwhelmingly, the financial reports improve the stakeholders’ decision-making activities.
Works Cited
Fridson, Martin. Financial Statement Analysis. New York: J. Wiley & Sons, 2011. Print.
Hauch, Valerie. Durham College, UOIT Deny Cash to Student Association, 2013. Web.
Wiborg, Karsten. Basic Financial Accounting. New York: Academica Press, 2010.Print.
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