Accounting Procedures and Earnings Essay

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Retained Earnings

The items contained in the Retained Earnings section of a balance sheet are often complex and confusing. Suggest an improvement for the reporting on this information that will help the users of the statement to have a better understanding of the activity.

There are some issues analysts have with relying on retained earnings. The most notable include: many of the strongest firms do not pay any kind of dividends. This is because these companies are reinvesting their profits back into the business and will not offer investors with added financial incentives other than higher levels of growth. Once the firm and industry has matured, is when they will pay shareholders dividends. In this case, the total returns are lower from the inability to increase the earnings of the company in comparison with the past. (Lofton, 2011)

Evaluate what a cumulative loss in the retained earnings section of a company's balance sheet might indicate about the financial performance in the future, indicating how this may influence decisions made about the company. Provide support for your answer.

Cumulative losses allow accountants to improve the accuracy of the financial results. This is taking place through making changes in the period where they actually happen.

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However, during this process, there is the possibility their projections could be erroneous. This is because they are making predictions about the future that were incorrect. In any kind of business, certain challenges will arise which are difficult in meeting these numbers. This is the point they will have to revise them lower. Over the course of time, regulators and investors will question the validity of the information they are provided with. This makes it appear as if financial improprieties are taking place. Yet, actuaries have no control over the impact of outside events on the firm. This will influences the management's decisions by impacting their ability to deploy working capital and what areas these activities will occur. (Bragg, 2010)

Based on your research conducted in the e-Activity, evaluate the business decision to use a venture capitalist to raise funds, indicating whether or not you believe the company will benefit from this decision in the long run. Provide support for your position.

Venture capitalists have an impact on firms. This is taking place through the tremendous amounts of financing they provide to corporations. During some of the most critical stages of growth, these companies have the capacity….....

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