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That is important information, because the investor is making an investment in the company's well-being.
In summary, I would not make this investment; it is unwise. There are myriad problems with the financial statements. They are unaudited, which means that the accuracy of the information contained therein cannot be guaranteed. Without auditing, the statements cannot be taken at face value and in fact they could be total fabrications.
The statements do not contain disclosures. Disclosure reveals key details about the business and about the firm's accounting practices that will impact the interpretation of the financial statements. Statements without disclosures are essentially incomplete statements. Changes in simple things like the method of measuring inventory or the method used for depreciation can have a significant impact on the bottom line number, and therefore are essential for the interpretation of both the income statement and the balance sheet.
In addition, there are no comparable figures from other years to lend perspective. Information from a single year is fine and dandy, but it is entirely without context. The context is critical because the state of the firm today is not terribly useful without some sense of where the firm has been in the past. Including the comparable figures from past years is essential because it allows for a trend analysis, from which a significant amount of insight can be derived.
Lastly, the statements are too old to be useful in an investment decision today. A...
The statements should be as fresh as possible. The firm's business and its prospects could have changed substantially over the course of the last year, but that information would be entirely hidden given the age of the statements. For example, the favorable debt-to-equity ratio that we see on the current balance sheet may not be at all accurate -- for all we know the firm could have taken out a significant amount of debt in the past year.
Investment decisions are not to be made in haste. Making a good investment decision requires careful analysis of reliable financial statements. The statements in their current condition are not only unreliable, but they are also incomplete. This means that they cannot be carefully analyzed, even if they were considered to be reliable.
Works Cited:
Vitez, O. (2010). Purpose of auditing financial statements. eHow. Retrieved February 16, 2010 from http://www.ehow.com/about_5179679_purpose-auditing-financial-statements.html
Richardson, S. (2002). Timely, useful and reliable financial information. The Public Manager. Vol. 31.
AICPA. (2010). Chapter 6 -- Financial statements and related disclosures. American Institute of Certified Public Accountants. Retrieved February 16, 2010 from http://www.aicpa.org/Professional+Resources/Accounting+and+Auditing/Accounting+Standards/ibr/chap6.htm
Robinson, D. (1975). Analysis and interpretation of financial data. NACUBO Professional File. Vol. 7, 3.
Works Cited:
Vitez, O. (2010). Purpose of auditing financial statements. eHow. Retrieved February 16, 2010 from http://www.ehow.com/about_5179679_purpose-auditing-financial-statements.html
Richardson, S. (2002). Timely, useful and reliable financial information. The Public Manager. Vol. 31.
AICPA. (2010). Chapter 6 -- Financial statements and related disclosures. American Institute of Certified Public Accountants. Retrieved February 16, 2010 from http://www.aicpa.org/Professional+Resources/Accounting+and+Auditing/Accounting+Standards/ibr/chap6.htm
Robinson, D. (1975). Analysis and interpretation of financial data. NACUBO Professional File. Vol. 7, 3.
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