Limitations of financial reports (1 Viewer)

[aqwerty13402]

This is really silly and is probably a stupid question but. With limitations of financial reports such as normalising earnings, how is that a limitation? Is it not a good thing? I get valutation of assets, debt repayments and all the other obvious ones. But i don't get how normalising earnings, (which by definition are earnings adjusted to take into account changes in the economic cycle or to remove one off and unusual items impacting profitability to give more accurate depiction of earning of company) is a limitation

 

[its_ace21]

i personally tried to avoid this one because theres not much to say but basically ur still misleading ur potential investors, like these one-off events could have significantly impacted the business, but i feel like its more good than bad so i never really used it

 

[hafsah_]

i personally tried to avoid this one because theres not much to say but basically ur still misleading ur potential investors, like these one-off events could have significantly impacted the business, but i feel like its more good than bad so i never really used it

How do you still remember your HSC content
I've already forgotten for Operations and Marketing KBF

 

[aqwerty13402]

i personally tried to avoid this one because theres not much to say but basically ur still misleading ur potential investors, like these one-off events could have significantly impacted the business, but i feel like its more good than bad so i never really used it

Got it, thank you guys

 

[scaryshark09]

This is really silly and is probably a stupid question but. With limitations of financial reports such as normalising earnings, how is that a limitation? Is it not a good thing? I get valutation of assets, debt repayments and all the other obvious ones. But i don't get how normalising earnings, (which by definition are earnings adjusted to take into account changes in the economic cycle or to remove one off and unusual items impacting profitability to give more accurate depiction of earning of company) is a limitation

its because it doesn't provide an accurate depiction of the current financial position of the company. for example, if a company was the normalise earnings and remove the sale of a large factory, then they would not show their current ability to pay off debts, or make an investment. Like the amount of cash the business has may be misleading and thus may give a false perception of liquidity or solvency.

 

[aqwerty13402]

its because it doesn't provide an accurate depiction of the current financial position of the company. for example, if a company was the normalise earnings and remove the sale of a large factory, then they would not show their current ability to pay off debts, or make an investment. Like the amount of cash the business has may be misleading and thus may give a false perception of liquidity or solvency.

omg this might be it. THANSKKSKSKSKSKSS