Financial Statement Review
All answer are highlighted in Bold
What is the net income for the current fiscal year? Is it up or down from the
prior year? Why would this information be important to investors?
Answer
the net income for the current fiscal year for Ecolab is 703.6million dollars. The net income
has increased by 52% which appears to be a very significant positive increase. The
investors of Ecolab would be glad to see such increase as their earning per share would
have increased from $1.95 per share to $2.41 per share .This significant increase would
contribute positively in shareholder wealth .One more aspect why this information would
influence shareholder decision is the increment in dividends because if a company earns
good profits than they also increase the amount of dividends that will be paid to its
shareholders.
What is the ending balance in stockholders’ equity? Why would a labor union
potentially be interested in this information?
Answer
The total ending balance of Ecolab’s shareholder equity as reported in statement of
shareholder equity Is $6160 million for the year 2012.A labor union is a group of people
who tries to support the labor and enforce the rights related to labor laws. They also help
the labor and employees to get maximum possible benefits from their employer .Labor
union would be interested in the total stock holder equity because it shows the strength of a
company. If a company has substantial stockholder equity it means it will be able to
provide continuous employment to members of labor union. A part from that a company
has to pay certain expense relating to labor such as pension, provident fund which a
company can pay if it has enough equity that is the balance in it retained earnings.
What is the total value of assets? Why would this information be important to a
potential creditor?
Answer
The total Worth of Assets as reported in the annual report for the year 2012 is $17572.3
million. The potential creditor of a company would include its suppliers, Lenders such as
banks etc. All of them would be interested in the total assets because creditors such as
banks have charge over the assets of a company. Ecolab’s lenders would want that the
company’s total assets should at least cover their lending’s so in case if company gets
bankrupt or due to any other reason not been able to pay off their debt than these assets
could be used to pay off their loans .The total asset value of Ecolab would provide a
security to its creditors that their money will be paid eventually after selling these assets in
case of bankruptcy of insolvency.
What is the total cash flow from operation?
Answer
Cash flow from operating activities as reported in annual report for the year 2012 is $1203
million.
What financial statement user would find this information most important?
Answer
Cash flow from operations or operating activities will be important for most of the users of financial
statements which would include the shareholders, other investors, creditors etc. All of these users will
have significant interest in cash flow from operations as this is the figure that tells about the cash flow
generation of any entity. Shareholders will want to know cash flow from operations as their dividends
will be paid if company is generating enough cash flows from operations .Creditors will also be paid if
a company is generating enough cash flows .If a company is not able to generate cash flow from its
operations then it might not be able to make timely payment to its suppliers due to which this area is
of concern for major suppliers. In case of lenders the interest cost will be paid by the entity if it is
generating enough cash flows from its operations because even if a company is generating enough
profits but those are not converting into cash then interest payments could be deferred resulting in
loss to the lenders. Tax authorities will also be interested because a company if generating profits will
be liable to pay taxes but is those are not cash profits than company might not be able to pay of its tax
dues on time.