Is therefore uniquely positioned to offer superior

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is therefore uniquely positioned to offer superior and well-integrated digital lifestyle and produc- tivity solutions. A company's strategic (or business) plan reflects how it plans to achieve its goals and objec- rives. A plan's success depends on an effective analysis of market demand and supply. Specifi- cally, a company must assess demand for its products and services, and assess the supply of its inputs (both labor and capital). The plan must also include competitive analyses, opportunity assessments, and consideration of business threats. Historical financial statements provide insight into the success of a company's strategic plan, and are an important input to the planning process. These statements highlight portions of the strategic plan that proved profitable and, thus, warrant additional capital investment. They also reveal areas that are less effective, and provide information to help managers develop remedial action. Once strategic adjustments are planned and implemented, the resulting financial statements provide input into the planning process for the following year; and this process begins again. Understanding a company's strategic plan helps focus our analysis of financial statements by placing them in proper context. -~ ~- EXHIBIT 1.1 Business Activities Prior financial statements are inputs into planning ~ ..... ••. 1 :::;;: Current financial statements .::; reflect performance and condition ;: ~--:: Balancesheet ""'l..p Income statement ~. ~ Statement of stockholders' =.; equity -"'" Statement of cash flows Balancesheet Income statement Statement of stockholders' equity Statement of cash flows - ....... •.•.•...•. -~~ ~ Reports prepared Reports prepared Period of time EMAND FOR AND SUPPLY OF ACCOUNTING INFORMATION Demand for financial statements has existed for centuries as a means to facilitate efficient ontracting and risk-sharing. Decision makers and other stakeholders demand information on a company's past and prospective returns and risks. Supply of financial statements is driven by companies that wish to lower their costs of financing and less obvious costs such as political, contracting, and labor. Managers decide how much financial information to sup- ply by weighing the costs of disclosure against the benefits of disclosure. Regulatory agencies L01 Identifyand discuss the users and suppliers of financial statement information.
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1-7 Module 1 I Framework for Analysis and Valuation intervene in this process with various disclosure requirements that establish a minimum supply of information. Demand for Information The following broad classes of users possess a demand for financial accounting information: Managers and employees Investment analysts and information intermediaries Creditors and suppliers Shareholders and directors Customers and strategic partners Regulators and tax agencies Voters and their representatives For their own well-being and future earnings potential, managers and employees demand accounting information on the financial condition, profitability, and prospects of their com-
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