CONCEPT OF FINANCIAL APPRAISAL

 

            The financial appraisal is a vital unit to measure the performance of firms. Therefore, financial statements are prepared to serve the objective. “The primary focus of financial reporting is information about an enterprise’s performance provided by measures of earnings and its components. ”  ^{(Ernst & LLP, 2008)}

 

            Rrich A. Helfert rightly remarks, “The measurement of business performance is more complex and difficult, since it must deal with the effectiveness with which capital is employed, the efficiency and profitability of operations, and the value and safety of various claims against the business”  ^{(A & Hertfelt, 1997)}. The main object of preparing financial statement is to show the result achieved by an enterprise through its operations, the revenues and the actual financial position for the particular period on a particular date.

 

            In order to analyse Financial Statement properly, users must have a basic understanding of the concept and principles underlying their preparation. Without such an understanding users will not recognize the limits of financial statements.

 

            In any business enterprise accounting provides financial data through income statements, balance sheet and sources and uses of funds statements. ” The financial Manager must know how to interpret and use these statements in the allocation of the firms financial resources to generate the best return possible, in the long run, Finance are the link that integrates the economic theory with the numbers of accounting. ”  ^{(Block & Hirt, 1999)}