Overview: You just began a position as a financial accountant at Peyton Approved. In this role, your first task is toprepare the company’s financials for the year-end audit. Additionally, the company

Management Analysis Brief

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Management Analysis Brief

An organization`s current and future performance can be determined by examining the organization`s financial statements. These statements are interpreted depending on the business`s environment and past performance. Evaluating these statements is an important function where a business can understand the requirements needed for it to perform excellently. The management requires a brief explanation of financial information to make proper decisions concerning business progress.

A pro forma financial statement can be used to predict whether the organization will meet its future expansion goals. Every organization has a goal of reducing cost while producing maximum quality and quantity. The proforma statement will be used to show whether the business will cut down current costs, which the business can do without. The adjusted income will then be used for expansion purposes instead of placing them in the current processes where they are not fully utilized. Thus, the pro forma financial statement has a positive impact in predicting future organizational expansion.

Several generally accepted accounting principles (GAAP) apply in businesses and have implications when dealing with finances. Using the inventory costing method of accounting leads to a product price depending on the price of inventory. A rise in the price of inventory contributes to an increase in the price of the product. A contingent liability contributes to an obligation that involves setting aside some finances that will take care of a liability that may arise if a certain event happens. Contingent liability makes an organization reduce finances invested in assets which reduces profits and the return on capital. Revenue recognition is a principle in accounting that provides the conditions in which an income can be accounted for and how it can be accounted. According to revenue recognition, a business can only plan for the earnings once they have been recognized and recorded.

In accounting, several issues can emerge when interpreting financial information; first, differentiated periods can contribute to a difference in financial derivatives. For example, a financial record being recorded in march will have a different impact when interpreted in July, especially if there has been a change in the value of the currency. Secondly, financial information differences may emerge from different methods of financial aggregation. Financial data interpretation contains data from different operations and companies. Finally, an interpretation may provide different derivatives as a result of different financial calculation methods. For example, different departments may use different methods of income valuation.