Characteristics of Entities Having Financial Statements

Non-profit organizations such as government and charities typically present statements which exhibit their resources and the way those resources are distributed or held. Stewardship and responsibility are the focus for these statements. Financial statements for private individuals focus on resources and obligations -- helping the person to assess his or her financial condition and to plan financial affairs (or obtain a bank loan) [Rosenfield, 1981]. Retailers are typically highly mortgaged, rely on credit to wholesalers (following a desire for a large and varied stock), often offer extensive credit to customers (or no credit, on a strictly cash basis) and reside in high-rent locations. Wholesalers tend to be characterized by large inventories, large sales volume (with small profit margin) and chronic credit problems with retailers. Manufacturers tend to have a substantial investment in fixed assets (machinery, equipment and buildings) and often face major problems due to a large work-force [Costales,1979]. Service industries -- such as railroads, airlines and public utilities -- have less of a problem with flow of inventory. Their focus tends to be on balancing operating revenue against operating expenses dominated by fixed assets (depreciation, repairs, replacement, maintenance, etc.). Companies with high proportions of current assets tend to be financed through short-term borrowing and shareowner investment. Industrial corporations tend to be financed primarily through shareowners, whereas public utilities and railroads are more often financed by long-term borrowing (bonds) [Holmes, et al,1970].