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The Primary Objectives of Financial Reporting. How Are We Doing?. So, how are we doing?. Results of a survey by the Chartered Financial Analysts (CFAs) (1994). Survey. The CFA survey was sent to 1,300 CFAs in the United States.

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so how are we doing

So, how are we doing?

Results of a survey by the Chartered Financial Analysts (CFAs) (1994)

survey
Survey . . .
  • The CFA survey was sent to 1,300 CFAs in the United States.
    • Completed questionnaires were returned by 508 members.
    • The majority of respondents had 11 years or more of experience.
sample members were told
Sample members were told
  • “Your frame of reference should be that of a financial analyst evaluating a common stock in a manufacturing firm.”
members were asked
Members were asked . . .
  • To evaluate the adequacy of the information disclosed in annual reports for investment decisions.
if information is lacking
If information is lacking

What information would you like to see included?

Hmm!

slide10

Balance Sheet

Income Statement

Stmt of CF

Stmt of OE

Notes

Comparative Summary

Assign a score to . . .

+

That reflects the usefulness to investment decisions.

+

scores assigned
1. No usefulness,

2. Slightly useful,

3. Moderately useful,

4. Average usefulness,

5. Very useful, and

6. Extremely useful

Scores Assigned . . .
slide13

53%

Said information in annual reports is adequate for investment decisions.

10

10

10

slide14

3%

Said information in annual reports is excessive (overkill) for investment decisions.

4

3

5

slide15

44%

Said information in annual reports is deficient (more is needed).

5

6

3

slide16

A Company’s Competitive Position

93.0

Industry Trends

91.6

Long-Term Corporate Goals

78.0

Plant Capacity

58.4

Dividend Policy

49.5

Budgeting For Next Five Years

42.5

Pricing Policies

39.3

Quality of Management

37.9

Forecasts of Sales

31.8

Forecasts of Earnings Per Share

29.4

Additional Information Desired

the results
The Results . . .
  • Other items requested by ten percent of those responding . . ..
    • Detailed cost data;
    • New products;
    • Environmental litigation;
    • Additional cash flow data, and
    • Segment breakdowns.
the results1
The Results . . .
  • Other disclosures desired . . .
    • Variances from budgeted amounts;
    • Product life cycle;
    • Debt policies
    • R&D goals;
    • Operating problems;
    • Capital projects
slide19

Income Statement

5.93

Cash Flow Statement

5.34

Balance Sheet

5.31

Notes to the Financial Statements

4.42

Comparative Summary of Data

3.66

Stockholders’ Equity Statement

2.04

Average Usefulness of Annual Report Sections

slide20

The primary financial statements fall into this area of the continuum . . .

Not

Moderately

Average

Very

Extremely

Slightly

Level of Adequacy

slide21

The notes to the financial statements fall into this area of the continuum . . .

Not

Moderately

Average

Very

Extremely

Slightly

Level of Adequacy

slide22

Individual financial statement lineitems and notes . . .

Not

Moderately

Average

Very

Extremely

Slightly

Level of Adequacy

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