Why Look At A Financial Statements Of A UK Company?

Financial statement is an important aspect of every business company. The main purpose of a financial statement in the UK, just like in other countries, is to provide information about the financial position to allow easy understanding and transparency. It determines and verifies if a company is capable of producing cash, as well as the source and utilisation of the cash..

In the UK, the financial statements are plays key role in business transparency and accountability. This is the reason why it needs to be understandable, reliable, relevant and commensurable. The assessment given on assets, liabilities, equity, income and expenses are dictators of  an organisation’s financial position.  Financial reporting and analysis would give investors, creditors, and other businesses an idea of the financial integrity and creditworthiness of the companies.

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The ‘true and fair’ concept has been a part of English law and central to accounting and auditing practice in the UK for many decades. If any financial statement is to be audited, there must be a proper scrutiny to avoid any form of falsery in figures or calculations. This is part of the principle every company always try to adhere to. For this reason, you can rely more on the financial reports.

The UK companies find it essential to analyse their financial statements so that it would assist them in making strategic decisions that  would support growth and long-term profitability. The Balance Sheet, Income Statement, Statement of Cash Flow, and Statement of Retained earnings are valuable documents that are critically utilised to understanding how their business is performing

Furthermore, the use of  Financial reporting software in the UK provides crucial information that are pivotal in making better business decisions – for example, whether you should the business by creating more branches. This can be determined if the number of customers patronising the particular business.

Taxes are also one of the the reasons for the importance of financial statement analysis in UK. The government utilises such reports to ensure that you are paying your fair share of taxes. The government’s requirements for these documents has created an entire industry of auditing firms that exist to independently review companies’ financial reports. This auditing process is also a legal requirement.

The use of Financial statements in the UK also helps companies to attract more customers. When the statement is published online where it can be seen by several viewers in the world, it shows the level of transparency and it means customers can rely more on this particular companies when it comes to doing business. It also shows the exchange of cash between a company and the outside world during a period, and so investors can know if the company has enough cash to pay for expenses and asset purchases. 

In conclusion, financial statements in the UK companies help in the interpretation of the overall health of your company. If your profit and loss statement shows that you are earning a profit but your balance sheet and cash flow statement show you are operating in the red, then you are probably on the right track and it's just a matter of time before you catch up. If your balance sheet and cash flow projection show that you have sufficient capital but your profit and loss statement shows that your business is losing money, you brace up and know how to revive it with the little resources you have before it gets too late