Answer the questions related to fundamentals of finance Research Paper

Answer the questions related to fundamentals of finance - Research Paper Example For example, a company which is forced to delay investments to achieve earning target is trapped in short term vision. This tension can be described as a disturbance in equilibrium of maintaining balance between profitability & earning and growth & development of a firm. For example, a company focused on boosting high margin by reducing costs may also have to compromise on research and development or other investment on technological advancement. This may result in loosing profitability in long term to competitor. This tension can be described as a disturbance in equilibrium of maintaining balance between creating companywide benefits and utilizing individual potential of the units to the optimum level. One example of a firm trapped in such tension can be an organization which is swinging its operation between centralization and decentralization of its operations. The purpose of the Financial Statements is to provide information about the financial position, performance and comparative financial trend of the firm to various stakeholders in order to facilitate them in economic decision making. Internal financial statement, however, is prepared for internal management and managers. It facilitates them in financial analysis and making business decisions. Whereas, financial statements intended for public is used for external stakeholders such as investors, shareholders and regulators etc. The fundamental difference between the two is that financial statements for the public is standardized and regulated by the authorities and regulatory body. It has to comply with minimum international and local accounting standard. Furthermore, the public statement is required to be audited and endorsed by the external auditors. On the other hand, there are not strict regulatory standards for internal statements and are used for internal decision making. It is purpose driven and can be