Global Journal of Management and Business Research, C: Finance, Volume 22 Issue 5

must be aware of whether the values contained therein are significant. Suppose some values contained in balance sheets are "extraordinary" or "transitory". In that case, the analyst must highlight this situation and, necessarily, be able to express a judgement on the basis, simultaneously, of the analysis of the "abnormal" punctual data and of the values that, after a few days, those accounts take on. As we have highlighted in the preceding pages, indices identify indispensable tools for the financial analysis of a company. Such an in-depth analysis cannot be carried out without a prior comparison of the items and aggregates of the balance sheet (and, in some cases, of the profit and loss) since only such an operation can make it possible to understand the existence or absence of balance between items distinguished by similar characteristics (of maturity, of structure, etc.). Therefore, the financial reporting quotient represents a highly relevant analysis tool, as it disregards the absolute value of accounts to focus attention on aspects of relativity. The preceding pages also emphasised that it is indispensable to implement an integrated analysis system, as the interpretation of individual quotients can be limited and misleading. Furthermore, it must be emphasised how the various ratios must often be investigated in light of several considerations that cannot be derived directly from the balance sheet and profit-and-loss accounting values. However, it must be pointed out that, in reality, carrying out a complete analysis of the company's financial situation requires, in addition to the instruments indicated above, other means of in-depth accounting. Let us suppose, for example, that we wish to carry out an analysis by indexes, systematic and characterised by the simultaneous consideration of all the elements of helpful knowledge for the interpretation of the quotients themselves. One must ask oneself the following: does compliance with the three conditions mentioned above (implementation of a systematic, systematic analysis, supplemented by the in-depth consideration of extra- financial reporting considerations) make the results of the financial study complete, exhaustive and reliaole? The answer is no. To demonstrate this, consider this simple example: Let us assume that a company is characterised by a current ratio demonstrating financial strength. Let us imagine that its value, referring to the end of a given year, is 1.5 and let us assume that, compared to previous years, there is a constant trend or one characterised by small changes in the range between 1.3 and 1.5. The latter circumstance demonstrates perfect short-term financial equilibrium. Suppose the analysis was to end with an in-depth examination of this ratio and other financial ratios. In that case, one could conclude that the company is characterised by a short- term financial solidity that does not create any particular problems or shows an ideal financial situation. However, stopping at analysing a ratio of several financial ratios would be a grave mistake because the apparent financial equilibrium established by the ratios could hide a dynamic imbalance that the ratios, precisely because of their structural characteristics, could never show. Let us suppose that we analyse the company's next year's data and learn that the financial and, therefore, in our context, monetary revenues expected for the following year derive from obtaining a loan from a financial institution. Assume that future expenditures, on the other hand, arise from the ordinary course of the company's core business and thus relate to the purchase and subsequent payment of wages, purchase of raw materials and amount of utilities. Since the objective of this example is merely to highlight the limitations of indices, the items considered here as requirements and monetary sources are limited to facilitate the understanding of the concept being illustrated. Against this background, the balance shown by the current ratio appears decidedly overstated concerning an overall judgement of the company's financial situation. In the following period, the consideration of the type of income and expenditure tarnishes the importance of the above ratio and sheds new light on the interpretation of ratios. Ratios analysis, even if it is carried out systematically and systematically, cannot allow in-depth consideration of the monetary income and expenditure that the enterprise has had or will have in the future. This is not because the financial ratio is incorrectly calculated. Still, because the ratio is in itself static and therefore lacking in information concerning income and expenditure, it is the quality and characteristics of the latter that have occurred or will occur in the period under consideration. These considerations do not make it possible to develop a dynamic financial and monetary analysis using the ratios tool, whose objective is the quantitative and qualitative deepening of financial and monetary sources and requirements. Considering these considerations, one can understand how the ratios analysis must be deepened by another tool that identifies the company's financial and monetary income and expenditure. Only in this way can the financial analysis be considered complete. These considerations allow us to state that, to express an opinion on a company's financial situation, the analysis by indexes must necessarily be supplemented by a qualitative comparison between income and expenditure. It can only implement the qualitative analysis of income and spending through the use of an accounting tool that, on the one hand, identifies all needs and all sources and, on the other hand, allows an in-depth qualitative analysis of the items thus specified. This analysis is implemented through financial flows. 11 Global Journal of Management and Business Research Volume XXII Issue V Version I Year 2022 ( ) C © 2022 Global Journals Does the Formal Structure of the Cash Flow Statement have an Impact on the Understanding of the Data Contained in the Report Explaining the Company's Financial Dynamics?