4 Alerting Indications on Your Financial Statements

Are you aware that you can make use of the financial statements of your organisation when making crucial choices? If you do not understand just how to prepare a financial statement, you might contract out any accounting firm in Johor Bahru to ensure that you can check your company’s efficiency.

It is not an uphill struggle to check out the financial statements of your company when you recognize the format of the financial statements as well as the financial language. Below are some indications you require to take note of when evaluating your financial statements.

Growing Stock Level

The raised stock level suggests that your products are not marketing well enough (Also see Ways to Improve Working Capital). This may result in obsolescence or perishing.

To recognize the growing stock level, calculate the ordinary stock for your accounting period and also separate the end results utilizing this year’s sales. It is very likely that you have the stocks you that is not demanded by market if this proportion surpasses the previous years.

Non-Current Assets Disposal

It is not incorrect to dispose tools that are unneeded for your present company consumption. The trouble takes place when the company’s management gets rid of the non-current assets to generate cash (Also see Difference Between Cash Accounting and Accrual Accounting) to finance expenses or pay off their others financial obligation.

Not using the proceeds from the disposal of non-current assets to reinvest may result in significant consequences in future operating revenue.

Poor Cash Flow Patterns

Do not be blinded by the reality that your company is developing some superb profits. It could be an outcome of negative cash flow patterns, this can be alarming to the company’s shareholders and also possibly perceived as poor collection of debt.

Hiking Receivables

It is great to have substantial receivables number, however if you are unsure that you will be able to collect them all, do not commemorate prematurely. In many cases, the customers could not pay as anticipated, especially for accounts that have been outstanding for an extended period without even being partially paid. For this reason, hiking receivables may suggest that you are not effective in collecting your consumers owe you.

Since it is mandatory to prepare financial statements in Malaysia. The company might as well make sure of these records to examine if there is any of these indications. Therefore, you might require an accounting firm in Johor Bahru to prepare a financial statement to reveal you the stock level, cash flow pattern, as well as just how money from disposal of non-current assets is reinvested in your organisation.