Financial Management Summary

LECTURE 1

Financial reporting represents the economic situation of the company, so that third parties
can form a reliable opinion.
There are mainly four areas of information, which are:
Asset position Statement of Financial Position
Earnings situation Statement of profit or loss
Financial position Statement of cash flows
Equity Statement of changes in equity
! to remark that principal and agent are provided with asymmetric information, verified by
auditors. The principal commissions the agent and the agent performs to the principal.
There is need for information instead of provision of information.

The Principle agency model defines three main roles:

Investors: define rules for financial reporting (info, discharge, control, profit sharing)
Management: prepare financial statements
Auditors: assess/control the implementation/following of the rules

Investors need information in order to take decisions: invest or disinvest, decide on loans
They therefore require information:
Market Industry, trends, margins, competition
Management team
 Preparation of information
usiness Administration
Financial Management
Simon Pfister, Ph.D.
Lecture 1 page 13
Objective of Financial Reporting
Money financial reporting
Financial
The core question here is: cash pay-back, interests, dividends and market returns?
The goal of financial statements is to provideReporting
information regarding the
Based and oriented on cash.
asset, financial and earnings position as well as changes in the asset and
financial position of a company&that is useful for the economic
Recipients decisionsmaking
Decision of
a broad audience of recipients.
need for information
OBJECTIVE OF FINANCIAL REPORTING

Preparation of information

Financial
Reporting

Recipients & Decision making

need for information
Business Administration
Financial Management
Simon Pfister, Ph.D.
Lecture 1 page 14
Scope of Financial Reporting
Provide information regarding asset, financial and earnings position useful for the
economic decisions of a broad audience of recipients.

Financial reporting

Ad hoc publication Pro-forma reports Interim reporting Annual report

usiness Administration
Financial Management
Simon Pfister, Ph.D.
Lecture 1 page 14
Scope of Financial Reporting Financial statements Reports

Company or consolidated financial statements Management report

Mandatory components of financial statements Corporate Governance report

Statement of Statement of profit or loss

Financial reportingfinancial position and other comp. income Corporate Responsibility report / Sustainability report

Statement of Statement of
cash flows changes in equity Value adding report
Ad hoc publication Pro-forma reports Interim reporting Annual report

Notes etc.

Financial statements Reports

Company or consolidated financial statements Management report

Ad hoc publication:
Mandatory press
components of financial release when something
statements important
Corporate Governance report happens to the
Statement of Statement of profit or loss
company or the market
financial position (especially
and other comp. income when with
Corporate consequences
Responsibility report / Sustainability on
report stock price)

Statement of Statement of
relevant
cashfor
flows stock exchange
changes in equity course Value adding report

Notes
Pro-forma reports: financial statement after the company
etc.
has changed (especially in
case of mergers and acquisitions)
Interim reporting: every quarter