FINANCIAL STATEMENT DATA ARE ESSENTIAL TO EVALUATE THE RELIABILITY AND SOLVENCY OF A COMPANY IN THE INTERNATIONAL ARENA?

20/01/2018

FINANCIAL STATEMENT DATA ARE ESSENTIAL TO EVALUATE THE RELIABILITY AND SOLVENCY OF A COMPANY IN THE INTERNATIONAL ARENA?


It often happens that our clients place us questions on financial statemen.

It is asked to us why the data is organized in a certain way, why some items are present and not others, why not present the economic section ( called income statement or profit and loss ) if are present or available the explanatory notes.

Our analysts to respond the questions of our customers often emphasize some concepts:

  • the main mistake that commit our customers is to believe that the information and reports that are available in their country are the same ones that can get in the countries in which they are located companies we want to or already do business;

  • It's concept deeply rooted but equally wrong: the information being reported in the international financial statemen depends primarily from the country's legal system data available;

  • this concept obviously applies also and especially to the balance sheet data: there are countries where the financial statements is mandatory and exhaustive (such as in most of Europe), while in other areas it is very concise, as well as in other countries does not apply the 'general obligation of preparing and / or filing of the financial statements (Switzerland, USA, Canada, etc);

  • do not expect the same data layout;

  • Not consider that the application of national accounting and tax laws may determine, sometimes, handling of financial statement values, making sure that financial statement data represents a company in a state different than real;

  • don't keep in mind that the financial statements always shows the past, while we are interested in determining the company credit score today. This is a fundamental concept, and that should make you think when buy database credit reports from. We are proud to provide credit reports that are always updated to the date of the request of our customers.

However the financial statements is essential in determining or not the company credit score?

In our view we can say financial statements has a significant importance in the credit score formation but it is only one element of the puzzle; in countries where data are not available or are very poor it will determine what credit agency you're entrusted with and whether this can remedy the situation by collecting alternative data or special services (how credit report with inspection visit) .

Make good business!