The nature of financial information analysis Essay

The nature of financial information analysis - Essay Example This research will begin with the statement that Financial Information Analysis reflects the developments by addressing the natural world and function of accounting information in the past and present society, with specific reference to technological change. The increasing focuses particularly primary accounting documents, analysis, presentation, and Annual Reporting which propels it to the justifiable level. The main aim apparently is to endow users with the skills required to fathom the information content relevant and other accounting related materials. These functions facilitate corporate governance on creative accounting, the relevant pronouncement in regulatory structures that have been rewritten to add new insight, and emphasis. Information analysis is an art which is highly subjective exercise where skills, experience, and intuition of users account the very critical factor of consideration. The core mandate of accounting reporting, therefore, is to gather information about a n organizations strategy, its operations, and future prospects in relation to commercial, environmental and social context. This is meant to be an organization's most important reporting tool addressing how the business activities are trading and to which extent is the state of affairs in regard to the financial position. In other words, the following performance areas of concern are addressed; what is financial efficiency, liquidity, and its gearing status as well as the expectation of the shareholder in return to their money invested. Its pertinent aim is to create a formula for accounting for sustainability, bringing together governance, social, environmental and finance in a cohesive way. Financial information need to achieve financial development, sustainability and improved performance while reporting on their overall performance. In fact, it exposed some businesses to their bare minimum since companies are able to reveal most of their financial details while yet they did not achieve better performance that they expected. This therefore necessitated the need for a new framework for critical analysis in reporting that would boost their performance through better modalities of information review. The process of creating an integrated management information system has been faced with a number of setbacks. This has been brought about by a number of challenges such as the existences of different rules and regulations governing the various jurisdictions in the international society. Therefore for a report to be standardized there is a need for such report or rules in reporting to be applied across the boards (PETERSON, & FABOZZI, 2012). This has been a problem because the international communities have a different set of laws that govern them and as such some reporting guidelines may not be acceptable to extents within a given jurisdictions. This greatly affects the process of creating an integral report since the committee has to compromise or look for alternative ideas or methods that can be generally accepted across the boards and one that is all inclusive. It may also mean that some jurisdictions may have to be guided by a different guideline on international reporting requir ements (SMULLEN, 1995). Since the idea of financial information analysis was relatively new, it goes without saying that

Dividend policy of the firm is irrelevant to the rational investor Essay

Dividend policy of the firm is irrelevant to the rational investor - Essay Example These factors lead to fluctuation in the share prices and valuation of the companies. The relevance of dividend policy to a rational investor has been discussed in the subsequent sections (Gross, 2007, p.14). Rational for dividend payments The objective of investments is aimed at capital appreciation of the assets or securities over the period of holding. So, there is a definite reason for the companies to pay dividends which actually reduces the long term capital appreciation due to liquid payments in the form of dividend. The dividend payments are clear cut statements by the companies to showcase their abilities to manage their assets and performance to achieve financial profits and growth. The payment of dividends by the companies assures majority of the investors of sound financial performance in future and builds confidence for investment in stocks (Xu and  Wang, 1997, p.19). The companies decide through their dividend policy on the proportion of dividend payout and the percen tage to be kept for retained earnings. The dividend payment allocations are very delicate as the company also has to focus on increasing the financial wealth in future and reduce their dependency on leverage. The interest and tax rates also play an important role in the dividend policy of the companies. A reduction in the tax rates on long term and short term capital gains would urge the companies to cut down their dividend payments and invest more retained earning for long term capital gains (Funke, 2007, p.11). Empirical theories: Irrelevance of Dividend Policy The aspect of irrelevance of dividend policy to a rational investor can be explained by considering the empirical theories of dividend policy. Residual... The companies give topmost priority to finance their needs of investment looking at the target growth rates to be achieved in the short-term as well as long run. Only after meeting the needs of finances, the companies decide to distribute the residual profits to the shareholders in the form of dividend payments. Thus the shareholders would not be concerned of the dividend policy as capital gains for future from the investments done by the company lies at the core of maximization of their wealth. The rational investors are also knowledgeable that there is no dividend policy that could referred to as an optimal dividend policy. The dividend policies are an outcome of the fund requirement of the companies for financing the investment projects. For this reason, the dividends are declared by the companies which lead to restoration of confidence among the shareholders. Thus the shareholders are attracted more towards the investment in the company stocks as a result of which the price of th e share rises and the valuation of the companies are increased.