Importance of financial statements to small enterprises stressed

A financial expert has emphasized the importance of financial statements to the small and medium enterprises (SMEs).
Mostafa Al-Abadi, professor of accounting, College of Business Administration, King Saud University (KSU), said in his presentation at Riyadh Chamber of Commerce and Industry (RCCI), said financial statements normally mirrored financial position and operational performance of any company and provided data whereby decisions were taken and strategies prepared.
RCCI's SME development committee organized the event in coordinator with the Saudi Accounting Association (SAA).
He said financial statements represent the final outcome of accounting cycle in a firm. They are composed of three elements - statement of income, the financial position and statement of cash flows, he said.
Elaborating on the issue, he said financial statements are aimed at providing data of the firm to the beneficiaries including the management, stakeholders, investors, creditors, and other governmental concerned agencies.
Rates of profitability and operational efficiency are determined by ratios of a firm's profits, liquidity, and exploitation of available resources, he said. Data of financial statements have to be honest, reliable, impartial, and understandable, he said.
Explaining functions of financial accounting, he said it measures assets, liabilities, and changes on assets and liabilities and shareholders' equity in addition to measurement of net profits and cash flows in a specific period.