Financial Statement Information

Financial Statement Information

The issues which cannot be obtained from the Cisco Systems Inc. and Dell Technologies Inc. financial statements are the actual market value of the firms, and whether fraudulent activity took place within the business. The aforementioned issues turn out to be of concern to any investor, as well as, other stakeholders because on the side of the investors, and they do not purchase stocks on the basis of a firm’s past financials. Buyers do not purchase a firm’s interest simply because it had a great year. The past cannot be the future; thus, intelligent shareholder put their cash into the future.

In that respect, they have interests in a firm’s product research, backlog, future revenue streams and other multiple things that indicate the market value of a firm but cannot be derived from the financial statement (AICPA, 2019). These products as well as services offered through Cisco organization, Inc is also efficiently commercialized. The Cisco Systems was initially marketed throughout educational innovations as well as has extended into the industry leader. Cisco organization commercialized their products as well as services in different means. For instance, Cisco Systems provided conference companies when advertising their goods, which advertised the company as active and engaged to their consumer support.

Additionally, Cisco Systems as well as marketplace their products as well as services through getting the non-restrictive way. For example, Cisco Systems also does not consider one kind of application. Rather the corporation pays also close attention to the consumers, new plus future trends, as well as offers a variety of the options to every consumer. As the result of the Cisco organization's victorious marketing method, the corporation has as well become the foremost industry leader. Important networks also have been critical to the Cisco organization Inc.

The world leader into networking for the Internet, Cisco offers the comprehensive line of the solutions for carrying information, sound, and television at double settings 120 and has been regarded with a number of the strategic networks within its pursuit of the competitive success. The Cisco lately broadcasted that it was altering its organizational system. In history, the business’s system had three main business units: the venture, the service provider, as well as commercial. Also, in every chance, this would be the case, even though the development of the strategy in addition to system in Cisco would finally settle the topic. It should also be noted that from a financial statement, the investors, together with other stakeholders, cannot establish as to whether the firms were involved in fraudulent activities.

In order to unearth involvement in fraudulent activity, much effort is required in looking at business practices, as well as procedures inclusive of routines and benchmarks. At the early twenty-first century, Dell extended its line of products to contain TVs, digital cameras, and the kind of the computer-related products. Also, in year 2003 the company was renamed Dell Inc. to indicate the change into the wider consumer electronics industry. Then in 2016, the company, as well as the finance firm, developed EMC, the American firm that dedicated in information warehousing. This union, valued at roughly $60 billion, was the major technology trade in this moment. No investor or stakeholder with an interest in dealing with a firm run by treacherous management would be comfortable.

In the fiscal year ended February 1, 2019, Dell Technologies Inc. made a net loss of $2.3 billion, had total debts of $111.5 billion and an asset turnover of 0.78%. This indicates that the firm needs vibrant marketing strategies and highly innovative products to increase sales and revenue. Conversely, Cisco Systems Inc. in the fiscal year ended 2019 reported net revenue of $51.9 billion, total debts of $24.6 billion, and an asset turnover of 0.11%. These figures suggest that Cisco is performing well financially. (AICPA, 2019)

Paper For Above instruction

The financial health and valuation of a company extend beyond what is directly stated in financial statements. Although these documents—such as balance sheets, income statements, and cash flow statements—provide essential insights into a company's operations, they do not reveal certain critical information like the company's current market value or potential involvement in fraudulent activities. For investors and stakeholders, understanding these limitations is vital for making informed decisions.

One of the significant limitations of financial statements is their inability to reflect the true market value of a company. Market value is heavily influenced by external factors, including investor sentiment, industry trends, and macroeconomic conditions, which are not directly captured in financial statements. For example, Cisco Systems and Dell Technologies, two prominent players in the technology sector, present financial data that suggest robust performance but do not necessarily translate to their current market valuations. Cisco's extensive network solutions and Dell's diversified product offerings contribute to perceived value that financials alone cannot quantify accurately.

Furthermore, financial statements do not provide explicit evidence of fraudulent activities or accounting manipulations. Detecting such activities requires thorough examination of internal processes, corporate governance practices, and deviations from standard routines and benchmarks. Although certain irregularities may eventually come to light through audits, forensic accounting, or whistleblower reports, they are not immediately evident from the financial statements alone. For instance, high debt levels, revenue recognition practices, or expense reporting patterns might indicate issues but cannot definitively prove misconduct by themselves.

Considering the cases of Cisco and Dell, both companies have displayed strong financial results but possess different strategic focuses and operational frameworks that impact their financial health. Cisco, renowned for its networking hardware and solutions, reported a net revenue of approximately $51.9 billion in 2019 with relatively low debt, reflecting its dominance in the internet infrastructure sector. Dell, on the other hand, reported higher revenues at about $90.63 billion but faced challenges such as significant debt load, with total debts exceeding $111 billion, and posted net losses in certain fiscal periods. These disparities underline the importance of analyzing both financial statements and external factors to gauge overall corporate health.

The investor's primary concern should be a comprehensive understanding of a company's future prospects, which financial statements alone cannot provide. Since financial data is historical, it must be supplemented with qualitative assessments of management quality, industry position, research and development efforts, and market trends. Additionally, due diligence should include scrutinizing internal controls to mitigate risks of fraud—an aspect beyond the scope of financial statements.

In conclusion, while financial statements are indispensable tools for evaluating a company's financial performance, they have inherent limitations. They do not reveal the company's real-time market valuation nor confirm the absence or presence of fraudulent activities. Therefore, investors must adopt a holistic approach—combining quantitative financial analysis with qualitative insights and internal audits—to make well-informed investment decisions in companies like Cisco Systems and Dell Technologies.

References

  • American Institute of Certified Public Accountants (AICPA). (2019). Codification of Statements on Auditing Standards. John Wiley & Sons.
  • Fraser, L. M., Ormiston, A., & Fraser, L. (2010). Understanding financial statements. Pearson Education.
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  • Easton, M., & Sommers, Z. (2018). Financial Statement Analysis & Valuation (5th ed.). McGraw-Hill Education.
  • Bogićević, J., Domanović, V., & Krstić, B. (2016). The role of financial and non-financial performance indicators in enterprise sustainability evaluation. Ekonomika, 62(3), 1-13.
  • Cisco Systems. (2019). Annual Report. Retrieved from https://investor.cisco.com
  • Dell Technologies. (2020). Fiscal Year 2020 Financial Results. PRNewswire. Retrieved from https://dell.com
  • Daniel, M., Neves, R. F., & Horta, N. (2017). Company event popularity for financial markets using Twitter and sentiment analysis. Expert Systems with Applications, 71, 402-413.
  • King, N., Masumoto, W., Heller, P., & Harp, M. (2011). U.S. Patent No. 7,941,353. Washington, DC: U.S. Patent and Trademark Office.
  • Fraser, L. M., Ormiston, A., & Fraser, L. (2010). Understanding financial statements. Pearson.

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