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Financial Statement Analysis

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What are the ramifications of failure to fully disclose items related to the balance sheet?

Which type of financial statement analysis is the most effective? Why?

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What are the ramifications of failure to fully disclose items related to the balance sheet?

Ethical issue: It is an unfair practice and is not a proper disclosure of the true picture of the company.
Business ethics is the branch of ethics that examines ethical rules and principles within a commercial context; the various moral or ethical problems that can arise in a business setting; and any special duties or obligations that apply to persons who are engaged in commerce.
All parties to corporate governance have an interest, whether direct or indirect, in the effective performance of the organisation..
Some of the variables considered by Business Ethics are:
1. Environment
2. Community relations
3. Employee relations
4. Share holders
3. Customer relations
4. Non U.S. stakeholders
5. Minorities and Women

Environment looks at positive programs in place such as pollution reduction, recycling, and energy-saving measures; as well as negative measures such as level of pollutants, EPA citations, fines, lawsuits, and other measures.
Community relations looks at philanthropy, any foundation the company has, community service projects, educational outreach, scholarships, employee volunteerism, and so forth.
Employee relations looks at wages relative to the industry, benefits paid, family-friendly policies, parental leave; team management, employee empowerment, and so forth.
Minorities and Women look at percent of minority and women among employees, managers, and board members; any EEOC complaints; diversity programs in place; lawsuits, and so forth.
Customer relations might include quality management programs, quality awards won, customer satisfaction measures, lawsuits, and so forth.
Shareholders and Non U.S. stakeholders look at their satisfaction

For example

In oder to boost profit if present investments in marketable securities at their market value, rather than at cost

Accounting issue: This is merely a window dressing of the accounts. It will artificially improve the value of marketable securities if the market value is high. If the market value is low than it is ok. Marketable securities according to the ...

Solution Summary

Financial Statement Analysis is conducted.

See Also This Related BrainMass Solution

Financial Statement Analysis: business decisions using each of the statements

1. What does the income statement tell you about the company?
2. What does the balance sheet tell you about the company?
3. What does the statement of cash flow tell you about the company?
4. What business decisions could be made using each of these financial statements?
5. What information is provided in the statements that will assist you in making these business decisions? What information is not provided that could assist in managerial decision making?

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