Company financial health : financial statement users' and compilers' perceptions
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Date
Authors
Du Toit, Elda
Vermaak, Frans N.S.
Journal Title
Journal ISSN
Volume Title
Publisher
Faculty of Economic and Financial Sciences, University of Johannesburg
Abstract
Some prior studies have investigated using analyses of financial statements to reveal companies’ financial health, but the usefulness of using such analyses to reveal the financial health of companies and possible presence of accounting irregularities in South African companies needed further investigation. This study examines whether users and compilers of financial statements believe that analysing financial statements can provide clear indications of companies’ financial health. The study was conducted by means of a structured questionnaire based on statements made by experts in the field of accounting and financial statement analysis. The results from 237 respondents show that the compilers and users of financial statements are convinced of the usefulness of financial statement analysis in evaluations of companies’ financial health. This suggests that close scrutiny of a company’s financial statements, with an attitude of scepticism, has the potential to reveal possible irregularities and raise red flags about unhealthy company practices.
Description
Keywords
Accounting irregularities, Decision-making, Decision-usefulness, Financial health, Financial statements, Prediction, Ratio analysis
Sustainable Development Goals
Citation
Du Toit, E & Vermaak, F 2014, 'Company financial health : financial statement users' and compilers' perceptions', Journal of Economic and Financial Sciences, vol. 7, no. 3, pp. 819-836.