Finance Essay Example | Topics and Well Written Essays - 750 words

Finance - Essay Example The basic constituents of balance sheet are identified as the net worth of assets, equity of the owners or the stockholders and the liabilities held by the organization for a particular fiscal year. In this similar context, the assets which are taken into concern in the balance sheet of an organization include cash, stock or inventory, bills receivable, tangible properties (e.g. plant, machinery and buildings) and goodwill. In this context, the goodwill is viewed to be a kind of intangible asset and appears in the assets side of the balance sheet. Arguments concerning the calculation of goodwill and its inclusion in the asset side of a balance sheet have consequently given rise to certain questions which also requires to be considered by managers dealing with company finances (Zions Bank, n.d.). The key components of income statement of an organization include revenue, operating expenses (both direct as well as indirect), depreciation, operating profit, net income, earnings per share , gross and its corresponding net profit. In this regard, only the indirect expenses appear in the income statement as the expenditures are indirectly related with the making of goods which again gives rise to certain questions concerning the reasons to avoid including direct expenses. The income statement usually delivers an exact picture of the incomes as well as the expenses incurred by the business and also determines their profitability along with business performance (Wall Street Prep, n.d.). Challenges in Interpreting Financial Statements Managers entitled to perform the financial recording of an organization are often examined to face daunting problems or challenges while interpreting the financial statements in order to make efficient financial decisions. The reasons fundamentally include extremely competitive business conditions, composite business transactions, requirement to comply with composite accounting rules and regulations, inefficient reporting from subordinates a nd huge compliance expenditures. In this regard, one of the most apparent challenges which are frequently faced by the managers in interpreting financial statements is the obligation to follow specified auditor norms which if misrepresented can even necessitate financial restatements. Consequently, the reporting failures as a form of financial restatements pose considerable impact upon the organizations by affecting their financial position to a large extent (DeZoort, n.d.). The other challenge which might be faced by the managers while preparing financial records indicates towards the accurate determination of revenue or capital expenditures. This challenge can lead towards affecting the income statement of the organizations by a large degree. However, this challenge can be addressed by taking into concern the actual items of the revenues along with the expenditures in the income statement for the motive of evaluating profitability as well as flexibility (Wall Street Prep, n.d.). O verview of the Financial Statements of a Healthcare Organization The constituents of financial statements vary according to the business operations from one sector to another. The financial statement of UnitedHealth also reveals unique and immensely valuable information relating to the US healthcare sector. One of the imperative information which has been viewed in the 2011 financial statement of this organization is regarding the total revenue. As can be revealed from the information presented