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Financial information that is used in a company's financial statements is important not only to the company but to those that might have interest in investing in it. The information within allows managers and owners to plan and control the operation of the company and most importantly to make well informed business decisions. Knowing whether or not a company is creditworthy is why financial information is of great interest to suppliers, banks, other lenders, investors and shareholders. It is essential that companies abide by the rules set forth by the generally accepted accounting standards (GAAP). The intention of these principles is to present a rational and accurate picture of a company's financial position.
Factors to consider before deciding which company to purchase
Of course there are financial questions and other areas of concern that need to be evaluated before purchasing a business of any kind.
· Revenue and income generated by the business in the last 3 to 5 years
· What is the liquidity ratio?very critical if the company has a significant quantity of bank loans
· Current relationship with the banks?for future loans if need be
· Current asset value?the machines that are used to operate the business
· Depreciation of those machines?when and how much
· How does the company compare to those that are similar
· Why makes this company unique over others in the area
· Company's customer base?can we relate and build a relationship of our own
· R ...