Use of financial statements in nursing assignments| Nursing homework help
You can identify trends from the financial statements of a company to evaluate its performance. Trends are the changes in a measure or statistic over time. Trends related to cash flow, revenue, expenses and net income are the most critical to analyse.
It is possible to determine if revenues have been increasing or declining over time by looking at the sales trends. Increasing revenues indicate growth in the business, while declining revenues suggest a decrease in demand for the company’s products or services. Investors are attracted to companies that have a consistent growth in revenue, as this indicates quality management and potential future earnings.
COGS is a trend that measures the cost to an organization of producing its product, or providing its service. COGS increasing faster than revenues can signal problems with pricing strategy or higher operating expenses, which will reduce profit margins and investor returns. For long-term stability and high returns to investors, companies should maintain COGS:Revenue at a relatively steady ratio.
Analysis of net income trends can help determine whether profitability has improved over time, as well as if there are any other factors that may be driving the change in profitability. For example, higher sales and lower production costs/operational expenses. Positive trends are indicative of positive prospects, whereas negative trends may indicate that there is a need for improvements in the management of operations before any further investment by external parties like shareholders or new investors.
Finally, cash flow analysis provides insight into how efficiently an organization manages their working capital position (current assets – current liabilities). The cash flow metric provides investors with an insight into how money flows in and out of a company through its operations such as debt payments, dividends and inventory purchases. It can help them make decisions about whether or not to invest. Positive cash flow indicates stability, while negative cash flows may be a sign of significant risks. Investors should consider these before making an investment.
In conclusion, analyzing trends from financial statements helps stakeholders better understand where an organization stands today vis-a-vis yesterday’s performance – both positively (growth opportunities) & negatively (risks) – enabling them make better informed decisions when assessing investment opportunities within organizations.