This document is a dissertation proposal for the topic “Impact of the financial information in the valuation of the business firms.” The study will basically analyze the role that financial documents play in the process of determining the intrinsic value of a business, firm, company, or conglomerates (Wong 2012). In carrying out this study, information will be sourced from business journals, government reports, studies of small scale businesses and such other sources. In addition, documented studies will be used to check the correlation between proper financial documentation and accurate business valuation, as well as the presence and nature of business inefficiencies associated with the lack of financial information accountability.
The following part of the proposal will constitute of the following sections: Study background, definition of the main concepts, problem statement, aims of study, research questions, review of the research design and chapters outline.
1.1 Study Background
This section of the proposal will address the historical overview of financial information, particularly on business accounting, as well as its importance in various countries’ business policies in the world. It will also concentrate on the high nowadays popularity of the system compared to conservative systems of business governance and administration (Goodstein & Burke 1991). All the developing tendencies on the business basis will be overviewed as far as financial accounting is equally introduced. After finalizing of the development process, the importance of developing challenges of the nowadays book-keeping procedure will be researched.This will result into the essentiality of reckoning the role the information plays in terms of researching the overall effect of it as positive or negative in miscellaneous forms of business. The validity of the study will be proved in this part of the proposal, validating the idea that financial information is an important tool in the process of determining a business’s worth.
1.2 Definitions of the Main Concepts
After the main concepts, terms and ideas are chosen, the paper will provide definitions for all the key terms including financial information, book-keeping, books of accounts, accounts, balance sheets, profit, loss, profit and loss account, financial statement, assets, liabilities, liquidity, fixed assets, fixed liabilities, general ledger, trial balance, cost of goods sold, double entry system, debits and credits among other terms that will be used. All the other terms and concepts, used in the course of the research are going to be defined. (Spradley 1999).
1.3 Research Problem Statement
This section will provide a short overview of the principal points of the study, introduced as a statement of the researched problem. Next comes the definition of the problem: Studying the Impact of the Financial Information in the Valuation of the Business Firms.
1.4 Aims of Study and Research Questions
The problem statement will be separated in the different constituents, forming the study basis. They will be data acquisition through such methods as questionnaires, articles, journals and publications review, and the implementation of the various aspects of findings. Following are the key study objectives:
- Book-keeping analysis of selected businesses, firms and companies with an aim to establish percentage of the sample population practicing book-keeping.
- Organizational analysis of sample companies including their preparedness to handle emergency situations like bankruptcies and recession, and whether sound financial information accountability plays a part.
- The comparison of economic and organizational performance of firms, and companies with accurate financial information regarding their operations and companies without accurate documents or lacking financial information all together (McGranaghan 2010).
The following questions will be researched in the course of study:
- How extensive is book-keeping as a fundamental business undertaking both at the small scale and large scale business investment practices?
- Is there a difference in the preference to keep comprehensive financial records between small businesses and large firms, companies or multinationals?
- Are there regulations set by governments and other industry bodies that standardize financial information preparation and presentation and if so, what are the main bodies and their scopes?
- What changes are occurring in the mode of preparation and presentation of financial information over time, and how is this affecting the business practice? Such differences may include evolution of documents used to do a point view of business performance from the traditional balance sheet to the more recent financial statement.
- Are governments playing any role in setting the industry’s financial information trends for public companies? If they are, is the role effective?
- What are the most important applications of financial documents in the business’s internal functions and in the way a business relates to other businesses externally and what is the likely future financial information trend? This question might seek to answer the role of financial documents in internal analysis, as well as external applications such as mergers and acquisitions and partnership formation.
These questions will be answered after the process of data collection and analysis is completed. It will be starting point of the research, after which the methodology will follow.
1.5 Review of the research design
All the tools, used in the course of the research, will be shown in this section. It will define the types of data to be collected for this study, namely primary and secondary data. The primary data will be collected from small-scale businesses in various regions with sufficiently diverse statistical observations. It will be collected mainly through questionnaires and interviews. Phone calls may be used limitedly to reach physically unavailable but willing respondents. Peer reviewed journals will serve as a source for the secondary data. Different trade publications that can be accessed in the Internet and in various scholarly libraries will be also used. It may also include gazetted financial reports of public companies as well as private establishments of selected companies, which qualify for analysis that indicates a role played by financial information such as in mergers, bankruptcies, and share valuation. Studies, similar to the topic, will be included in this data (Krathwohl 1988).
1.6 Chapters Outline
All the chapters of the study, including the literature review chapter, methodology chapter, analysis chapter and the conclusion chapter will be introduced in this part of the research.
2.0 Literature Review
A brief overview of the business accounting history since its commencement as an industry to its present time as an analysis tool and as a business practice will be provided in this chapter. The section will look into the traditional ways, in which businesses were valued, and how lack of proper valuation methods affected profitability of businesses, preparedness of business owners to handle the business future, owners’ abilities to forecast trends in business performance, and business acquisition transactions. The section will also examine the shift in business investment from the traditionally physical asset dominated firms to the recent online presence-based portfolios of such companies as Skype, Tweeter among others. It will look into the various factors that are affecting businesses in the modern times. It will briefly look into the history of simple book-keeping documents such as the ledger, the cash sales books, the expenses accounts, the inventory reports and other commonly used documents. It will then proceed to look into the traditional tools of analysis of a business position such as the balance sheet, the trading account, the profit and loss accounts as well as the combined trade profit and loss account. The uses, strengths and weaknesses of these traditional documents will be explored in a way that brings out the inherent necessity for newer systems, as well as the dangers that were associated with the shortcomings of these documents. It will then explore the shift from reliability of these documents to more recent documents such as financial statements.
The section will explain the important contributions that new methods of analysis brought to the financial book-keeping practices. The next section will discuss the development of Information Technology and how different programs were used to ease such procedures as data entry and basic analysis. It will focus on such machines as cash registers and their totalizing mechanisms, receipt issuing machines and automatic teller machines. Then it will examine the birth of the computer with basic data entry and analysis programs such as Microsoft Office, Linux Open Office and Ubuntu. It will show how these programs were able to analyze business processes such as sales, expenses, and stock inventories. The next section will explore the development of advanced accounting software that is able to perform basic book-keeping as well as predict future performances, risks and values of business interactions. Such programs will include Statistical Packages For Social Scientists (SPSS), Oracle Systems, Payroll and Human Resource software among others.
The application of these programs, together with newer software that measures web-based business trends such as web traffic and product surveys will also be discussed with a special focus in their applicability in determination of business worth in cases where the business in question lacks physical assets but has mainly only an online portfolio. Such businesses may include social sites such as Skype, Google, Bing, Tweeter, Facebook and others. The section will also research the projected future of financial information in terms of technological advancement and I.T. incorporation, security measures and their implications, segmentation of financial tools among other parameters. A review of the businesses and firms that participated in the creation of the book-keeping tradition, will also be provided in this section.Short information about these businesses , the history of their foundation and work, their place on the market and its share, as well as their dependency on and advance the concept of book-keeping and accounting will be provided in this part.
2.1. Justification of Study.
This part will show why it is necessary that a study into the way various business and industry sectors are being affected by the lack of, or aided by presence of financial accounting information and how they should find a way forward be done. The section will also focus on how manipulation of financial reports may affect a company’s future as well as how it may affect its respective industry, stakeholders, investors and a country’s economy. It will draw its justification mainly from the findings in the section above, that is, literature review.
3.0 Methodology of the Research
The formulation of the tools, used in this section, will be provided, while The principle essential information will be obtained through questionnaires presented to small-scale business owners in varying industry sectors, as well as face to face interviews with willing respondents. It will also include telephone interviews and follow-ups in the case of physically unavailable respondents. The principal secondary data will be collected through surveys in the online archives. This method will target major companies and multinationals, which may not be interviewed or otherwise easily accessed due to two reasons: it may not be necessary to obtain primary data for most of them since such data is already present in multiple websites in case of public companies that are required to post their financial reports by law, or in the case of large private companies, if such data is likewise available due to publicized reports of interviews, which have recently been added or availed in trusted, reliable websites (Chamberlain 2005). Another reason may be if these companies cannot be easily accessible to give interviews for this study due to their geographical locations. Secondary data will include journals from the industries, government reports on some industries, peer review publications and consumer survey reports as well as financial reports watch websites (Bal 2005).
For the primary data, the questionnaires drafted will bear the following basic items: the type of the firm/business/company (in categories such as services, transport, consumer, manufacturing, education, social welfare among others), the age of the company (in year brackets which are 0-1 ,2-4, 5-7,8-9, above 10), whether the respondent keeps any financial records, and what type (wherein a list of basic and advanced documents will be provided against which to tick appropriately), presence of any book-keeping software applications (a list of common book keeping software will be provided against which to mark appropriately. Such software will include Ms Office, Open Office, SPSS, Oracle among others, a provision for other applications will be allowed with accompanying explanation), uses for which such books and applications are used will be requested (a list of common uses of financial tools will be given with provisions for additional uses allowed), decisions previously influenced by use of proper accounting tools (decisions such as stock renewals, profitability analysis, share value calculation, business worth calculation, acquisition or business purchase value among others will be expected) (Churchill 1995).
4.0 Data Analysis
The findings and results of the research will be displayed in this section. All the used methods, along with the analysis will be presented and interpreted. Various diagrams will be used to outline the results clearly and compare different aspects. The choice of the presentation mechanism to use will depend on the diversity of items in the analysis as well as the clarity of the presentation choice in the particular analysis (Bell 2002).
4.1 Research Limitations and shortcomings
In this sub-chapter, barriers to the study will be listed and explained. Appropriate corrective measures applied in order to attain a realistic result from the study will be explained. Unavoidable shortcomings will also be listed and explained. These may include inaccurate or/and incorrect information, vagueness in the part of respondents, lack of clear industry strategies of value calculation (as in the case of purely online businesses) and other shortcomings (“The Writing Center” 2004).
The previous chapter will be overviewed and summarized in this section. A detailed information about the outcome of the research will be provided, which will fully correspond to the adjusted data. It will meet the research objective in corpore. The suggested statements will show the way that presence or absence of financial information has affected different players in various industries and the way the sectors may adopt to financial reporting in the future (Berezin 2005).
This part will give the recommendations of the study with respect to the future of the importance of financial information in business valuation. These recommendations will arise mainly from the findings of the study, as well as other suggested contributions from the author to better the applications of financial records keeping. Recommendations regarding the mentioned shortcomings will also be listed and expounded in this section (Conle 2000).