The financial data provided by the three companies provides financial and investments market analyst with the optimum earning metric since it has both the consolidated balance sheet and income statement. The documents provide analysts with the information they require to assist them in assessing the financial position of an organization, for instance, the number of expenses recorded by the company. This information assists investment analysts in assessing the revenues and net income of the company. The data regarding the current liabilities and assets of the three companies' aid in current ratio calculation, thus knowing whether it is advisable to invest in any of the company given liquidation position.
At first, when we look at the consolidated income statements of Vestel and Modelo, they do not seem much detailed as compared to the information and data contained in Infosys. The earnings of Vestel appear to be based on the general price levels models, whereas the Infosys's numbers give the impression of current cost framework. Modelo applied a significant approach in accounting, which the other two companies did not use. In the financial statements of Modelo, effects of price changes had been introduced as "loss on a monetary position.” ( Flower & Ebbers, 2018). The operating profit of Modelo has increased by 22.1% from the year 2006 to 2007. This figure shows that revenues are growing and operating expenses decreasing. For Modelo, incomes are rising at a notable percentage; on the other hand, costs are declining. This information is useful to Modelo and investors to maximize their returns by investing in Modelo.
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Vestel Company has recorded a net loss of 4.13% from the year 2004 and 2005. The information provided has captured in price level changes, and inflation adjustments, hence the earnings of Vestel may have been overstated leading to; proportionate tax increase, more dividend payout to shareholders, and understatement of assets and expenses. This kind of information may discourage potential investment in Vestel due to the rising losses. In every investment opportunity, investors always want to maximize their returns while incurring minimal risks. With regards to Infosys, the operating income has increased by 45.9% from 2006 to 2007 (Choi & Meek, 2011). This figure is a good sign for a company doing well in business. The company uses the current cost accounting method, which provides more relevant and accurate information. Any decisions made based on this accounting approach are meaningful, beneficial, and productive.
In my opinion, the profitability recorded by Infosys offers enhanced earnings metrics for analysis of the investment. The cost data in Infosys seems more realistic to investors as dividends are calculated allocated to shareholders by ignoring the forthcoming dividend efficiency of the company. The profit and loss account reflects how the business has been influenced by the price, which is shown in the current cost incomes. Additionally, there is information regarding the company’s long term finances in the balance sheet. This information is vital in determining the solvency position of the company and ensuring a going concern. Most investors prefer to risking their funds in a company with an excellent financial situation. The use of current cost accounting method by Infosys has analyzed its operating capability. Thus it has been determined in the income statement that the company is capable of running efficiently with its existing resources, hence a better choice of investment.
References
Choi, F. D., & Meek, G. K. (2011). International Accounting (7th ed.). Upper Saddle River, NJ, New Jersey: Prentice Hall.
Flower, J., & Ebbers, G. (2018). Global financial reporting . Macmillan International Higher Education.
