Investors have financial information about public vs. private companies
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Part 1
Compare and contrast the access that investors have to financial information about public vs. private companies.
Part 2
a) What kind of information can be derived from the balance sheet?
b) What is the interrelationship among the four financial statements?
c) It is possible for a company to have a profit and a negative cash flow. Explain what could be happening if the root cause of this negative cash flow was generated by each of the three cash flow categories. (e.g., "Cash flow is negative and it is because of CF from Investments. What factors could be causing this?)
d) What methods are used to analyze an organization's financial condition and performance?
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Solution Summary
The expert compares and contrasts the access that investors have to financial information about public versus private companies are examined.
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Answer to question no: 1
In case of public companies, investors have access to all information about the financial position of the company .Because, financial statement viz., balance sheet, profit and loss account, cash flow statement and other supporting schedules and information should be compulsorily published by all public companies as per the provisions of the Act. On the other hand, there is no legal compulsion on the part of private companies to publish the financial statements to the public. Therefore, investors would not have access to the financial information and financial position of private limited companies and only the shareholders of private limited companies will know the financial position of the company.
Answer to question no: 2
a) What kind of information can be derived from the balance sheet?
Balance sheet shows the financial position of the company on the particular date i.e., usually at the end of the financial year
b) What is the interrelationship among the four financial statements?
Balance sheet shows the financial position of the company on a particular date usually at the end of the particular financial year. Balance sheet informs us the amount of fixed assets, current assets, investments made, amount of shareholders' equity, long term debt and current liabilities of the company.
Income statement shows the financial results of the company for the particular financial year. It shows the profit or loss of the company for the particular financial period. It shows the operational efficiency of the company.
Statement of retained earnings shows ...
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