The document summarizes key items that are commented on when analyzing published financial information. These include financial statements such as the balance sheet, income statement, statement of changes in equity, and cash flow statement. It also discusses trends in accounting information such as globalization and integration of financial markets, increases in mergers and acquisitions, corporate bond issuance, and growth of derivatives markets. Developments in the euro area financial market have also been significant.
The document summarizes key items that are commented on when analyzing published financial information. These include financial statements such as the balance sheet, income statement, statement of changes in equity, and cash flow statement. It also discusses trends in accounting information such as globalization and integration of financial markets, increases in mergers and acquisitions, corporate bond issuance, and growth of derivatives markets. Developments in the euro area financial market have also been significant.
The document summarizes key items that are commented on when analyzing published financial information. These include financial statements such as the balance sheet, income statement, statement of changes in equity, and cash flow statement. It also discusses trends in accounting information such as globalization and integration of financial markets, increases in mergers and acquisitions, corporate bond issuance, and growth of derivatives markets. Developments in the euro area financial market have also been significant.
The document summarizes key items that are commented on when analyzing published financial information. These include financial statements such as the balance sheet, income statement, statement of changes in equity, and cash flow statement. It also discusses trends in accounting information such as globalization and integration of financial markets, increases in mergers and acquisitions, corporate bond issuance, and growth of derivatives markets. Developments in the euro area financial market have also been significant.
3: Financial Awareness 3. Examine financial commentary that interprets and analyses published financial information
3.1 Main items commented on and explain their importance
Ø Financial statements (or financial report) is a formal record of the financial activities and position of a business, person, or other entity.
Ø The main segments to be used in the financial reporting of the organisation are the following.
A balance sheet or statement of financial position, reports on a
company's assets, liabilities, and owners equityat a given point in time.
An income statement or statement of comprehensive income, statement of revenue &
expense, P&L or profit and loss report, reports on a company's income, expenses, and profits over a period of time. A profit and loss statement provides information on the operation of the enterprise. These include sales and the various expenses incurred during the stated period. A Statement of changes in equity or equity statement or statement of retained
earnings, reports on the changes in equity of the company during the stated period
(Grinblatt and Titman, 2016).
A cash flow statement reports on a company's cash flow activities, particularly its
operating, investing and financing activities.
3.2. Identify trends in published accounting information Ø Perhaps foremost among recent changes in world financial markets has been their accelerating integration and globalisation.
Ø This development, which has been fostered by the liberalisation of markets, rapid technological progress and major advances in telecommunications, has created new investment and financing opportunities for businesses and people around the world.
Ø In part, this development has been spurred by the surge in mergers and acquisitions and leveraged buy-outs that has taken place in markets of late, not least in the euro area.
Ø One aspect of this securitisation process has been the increase in corporate bond issuance, which has also coincided with a diminishing supply of government bonds in many countries, particularly in the United States (Berger, Imbierowicz and Rauch, 2016) .
Ø Other interesting developments in world financial markets include the continued broadening and expansion of derivatives markets. Ø The broadening of these markets has largely come about because rapid advances in technology, financial engineering, and risk management have helped to enhance both the supply of and the demand for more complex and sophisticated derivatives products.
Ø The increased use of derivatives to adjust exposure to risk in financial markets has also contributed to the rise in the notional amounts of outstanding derivatives contracts seen in recent years, in particular in over-the-counter (OTC) derivatives markets with interest rates and equities as underlying securities.
Ø the leveraged nature of derivative instruments poses risks to individual investors, derivatives also provide scope for a more efficient allocation of risks in the economy, which is beneficial for the functioning of financial markets, and hence enhances the conditions for economic growth (Grinblatt and Titman, 2016).
Ø Among the many changes in global financial markets, developments in the euro area have been particularly striking. Reference Grinblatt, M. and Titman, S. (2016) Financial markets & corporate strategy.
Berger, A.N., Imbierowicz, B. and Rauch, C. (2016) The roles of corporate governance in bank failures during the recent financial crisis. Journal of Money, Credit and Banking, 48(4), pp.729-770.
Van Rixtel, A.A. and Gasperini, G. (2013) Financial crises and bank funding: recent experience in the euro area.
Brigham, E.F. (2014) Financial management theory and practice. London: Atlantic Publishers & Distri.
