Qualitative and quantitative limitations of financial statements
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1. What are the qualitative and quantitative limitations of financial statements? What is the FASB and what role does that entity play? Have you heard of and do you know the meaning of IFAS and GAAP?
2. About twenty years ago business educators articulated that the goal of financial management was to maximize shareholder wealth. In today's financial community, and especially the academic community, that view is not fully accepted. What has changed? Do financial managers really maximize stockholders' value?
3. What are some ethical considerations of accounting and finance? If you follow all applicable rules and regulations, are you an ethical person? Why do many business managers feel that ethical behavior is essential to the profitability and survival of their firm?
4. What information does a company's cash flow statement provide that is not available from the other financial statements? Be specific and cite at lease one example.
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Solution Summary
In approximately 1,332 words, this answer seeks to explain the qualitative and quantitative limitations of financial statements, the purpose of the FASB, and the meaning of IFRS and GAAP. It also discusses whether the maximization of shareholder wealth is still a goal today, and what kinds of ethical aspects need to be considered in accounting and finance. Explanation on what information a company's cash flow statement provides is also given.
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What are the qualitative and quantitative limitations of financial statements?
The financial statements are an invaluable tool for management, but the statements do definitely have their limitations. The financial statements are limited in their information. First of all, every financial statement reflects the past. Nowhere is current or future qualitative or quantitative data a part of the financial statements. The financial statements also do not show any qualitative aspect of running the company. Financial statements also don't show you what changes have been made in management, major process changes, etc. that directly affect how the company makes money, and how they operate.
What is the FASB and what role does that entity play?
The FASB is the Financial Accounting Standards Board, and they are responsible for setting the accounting standards that govern financial statement preparation in the private (non-governmental) sector of accounting. The mission of the FASB is to monitor and improve (when needed) current accounting policies and procedures.
Have you heard of and do you know the meaning of IFAS and GAAP?
I think the first one should be IFRS, and it is the International Financial Reporting Standards, or it was intended to be IASB by your professor, which is the International Accounting Standards Board. Both are basically one in the same. The IFRS is currently working in conjunction with the FASB to attempt to develop a single, international reporting standard that would be universally applied on a global basis. This would basically be in complete contrast of GAAP in the majority of the accounting areas. The rules that govern IFRS are drastically different than the rules that govern GAAP. ...
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