The post contains insightful information that may guide managers in explaining financial uncertainties without scaring the stakeholders. A financial report should be detailed and transparent to inform the audience about the organization’s future ( Roychowdhury et al., 2019 ). As stated in the post, managers should focus on the negative aspects and the growth opportunities. Although you have mentioned the significance of addressing the best- and worst-case scenarios, researchers recommend that financial reporting be frequent to gain the stakeholders’ confidence and reduce the firm’s capital cost ( Roychowdhury et al., 2019 ). Managers and shareholders have similar interests. When high-quality financial reporting is available, they are likely to invest the company’s resources in projects that may enhance growth and sustainability and mitigate moral hazards. For example, the post mentions how the COVID-19 pandemic created financial uncertainties. When explaining how companies can regain the stakeholders’ trust, the student should have highlighted how regular financial reporting transparency encourages the managers to seek investment opportunities to realize best-case scenarios and increase the firm’s size.
Nonetheless, the student’s post mentions the significance of re-forecasting as a means to realize long-term goals. Sometimes managers may manipulate reported numbers to convince the stakeholders about the firm’s progress ( Roychowdhury et al., 2019 ). Investors depend on earnings to forecast future earnings and the firm’s value. When managers inflate the current earnings, they may mislead the investors for a short period. However, when the stakeholders discover the truth, they are likely to shift their resources to competing companies. The best strategy to maintain the stakeholders’ trust is by informing them of the company’s long-term growth strategy. Managers should inform the stakeholders how the current issues may affect their financial position and draft a plan of how the company will research and seek available investment opportunities that will enable them to achieve its long-term goals. More importantly, the goals should be reasonable and easily achieved. Overall, the student’s post covers the vital aspects of financial reporting that may enhance the stakeholders’ trust and confidence.
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References
Roychowdhury, S., Shroff, N., & Verdi, R. S. (2019). The effects of financial reporting and disclosure on corporate investment: A review. Journal of Accounting and Economics , 68 (2-3), 101246.https://doi.org/10.1016/j.jacceco.2019.101246
