What management expects the future to look like

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Reference no: EM133792994

Case: After reviewing the Annual Report (10K) for Lowes Companies Inc., I have made several observations about the companies report. After reviewing the financial statement, it seems to be one of the most important parts of the overall report. The financial statement is import to investors and potential investors because it shows whether or not the company is doing well and the data to determine if the future of the company will be the same. The cash flow, balance sheet and shareholders information with all the companies liabilities are there for someone to review and look over. The notes section gives further details on the companies financial information and how decisions are made. By reviewing the income statement an investor can determine what outside factors effects the companies profits and losses. In the report the section Management's Discussion and Analysis of Financial Condition and Results of Operations breaks down the report to show how the company is doing and what management expects the future to look like.

The Financial Statement provides a great place to start researching a company, it does have some shortcomings. Sometimes assets can be overvalued or they can be hard to put a value on for some businesses. Companies can have value that is hard to put on a balance sheet, brand names that have been built over a long period of time or relationships can have large values that are hard to quantify. This problem has been made worse as more private equity funds have started putting different values on companies. Since the valuation on assets can be subjective, this can cause balance sheet revisions. For example in 2016 General Electric(GE) purchased a business for $10 billion even though it had a $-7 billion of value on its statement. GE justified the purchase by saying that the acquisition brought in revenue for cross-selling opportunities.

With all this information being considered, it doesn't seem that too much information is being put out for competitors to take advantage of. Especially knowing that there can be some information that can be subjective and more specific information can be with held or not fully explained. These reports give a good overview of how the company has performed in the past and managements outlook on the future.

Fridson, M. S., & Alvarez, F. (2022). Financial statement analysis a practitioner's guide Workbook. New York, Ny Wiley.

Reference no: EM133792994

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