Purpose
This Executive Report summarizes a series of interviews with preparers of financial
statements and commercial and investment bankers that sought to answer the
question, what do users of private company financial statements want? It has been
prepared with Financial Executives International’s Committee on Private Companies
for FEI members and others and has been sponsored by the NFIB Research
Foundation.
Executive Summary
The following themes emerged from the interviews:
Internal Management
• Internal managers receive financial and operating information for their businesses.
• This information is not in the format of full-disclosure, financial statements prepared
according to generally accepted accounting principles (GAAP).
• Operating information is provided on both a weekly and a monthly basis.
Bankers
• Banks want annual audited GAAP financial statements for accuracy and
comparability, and they also want quarterly financial statements.
• Other financial information that may be provided includes:
o Detailed aged payables, receivables and inventory.
o Monthly loan covenant calculations (debt to tangible net worth and current
ratio calculations).
o Collateral reports, and
o Quarterly cash flow coverage information.
• Data from financial statements are entered into computer models and databases to
measure liquidity and monitor compliance with debt covenants.
Investment Bankers
• Want audited annual GAAP financial statements for accuracy and comparability.
• Want supplemental information beyond GAAP, such as a history of capital
expenditures.
• A fair value appraisal will be required if a company is not liquid. This is not necessary
for a financially strong company.
Investor ...