Why is Financial Reporting Important To Enterpreneurs

1.Importance of Investors and Creditors

1.Importance of Financial Reporting

Financial reporting is perhaps the most significant tool that an entrepreneur will require in day-to-day business practices. One of the main tools in being a successful entrepreneur is being able to make accurate predictions, evaluations, and being consistent in doing so. For example, a stockholder that sees rising levels of net income knows that this means the company’s profits look solid, and for bankers, profit means that debt can be paid. As a prospective entrepreneur, do I truly understand the importance of financial reporting in my business? To answer this question, I will take a closer look at the importance of the FASB, the primary role of a business entity, and finally the importance financial performance indicators to a business.

More companies have adopted the policy of hiring staffing agencies to do some of their ‘dirty work’. One of these staffing agencies, Kelly Services, does the entire tasks necessary in the hiring process such as advertising, interviewing, and hiring. The use

Financial performance indicators are detrimental when it comes to running a company. The price per earnings ratio or P/E ratio is determined by dividing the price of the stock by company earnings per share. The underlying idea behind the P/E is that a high P/E means high projected earnings in the future. However, this indicator can be a bit misleading since P/E is traditionally based on trailing earnings (earnings from the past 12 months). There is always a possibility of a late earnings report from a company so then a calculation of a trailing P/E would be based on incomplete information. On the other hand, return on equity or ROE, which is calculated by taking a years worth of earnings and dividing them by the average shareholders equity for that year, is easily calculated and understood. It allows investors to compare the company’s use of its equity with other investments

According to Rutgers, the FASB’s (Financial Accounting Standards Board) objective is to “establish and improve standards of financial accounting and reporting for the guidance and education of the public, including issuers, auditors, and users of financial information.” This is crucial to all businesses because to make decisions about finances, you must be able to rely on having “credible, concise, and understandable financial information” (Rutgers). This is also crucial to helping business entities to reach their primary goal of generating profit.

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