Microeconomics is a branch of economics that studies the behaviour of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms. One goal of microeconomics is to analyze the market mechanisms that establish relative prices among goods and services and allocate limited resources among alternative uses. Microeconomics shows conditions, it analyzes market failure, where markets fail to produce efficient results. Microeconomics stands in contrast to macroeconomics, which involves "the sum total of economic activity, dealing with the issues of growth and unemployment and with national policies relating to these issues". Microeconomics deals with the effects of economic policies on microeconomic behavior and thus on the aforementioned aspects of the economy. In the wake of the Lucas critique, much of modern macroeconomic theories has been built upon microfoundations—i.e. Based upon basic assumptions about micro-level behavior.
Microeconomic theory begins with the study of a single rational and utility maximizing individual. To economists, rationality means an individual possesses stable preferences that are both complete and transitive; the technical assumption that preference relations are continuous is needed to ensure the existence of a utility function. Although microeconomic theory can continue without this assumption, it would make comparative statics impossible since there is no guarantee that the resulting utility function would be differentiable. Microeconomic theory progresses by defining a competitive budget set, a subset of the consumption set, it is at this point that economists make the technical assumption that preferences are locally non-satiated. Without the assumption of LNS there is no 100% guarantee but there would be a rational rise in individual utility. With the necessary tools and assumptions in place the utility maximization problem is developed; the utility maximization problem is the heart of consumer theory.
The utility maximization problem attempts to explain the action axiom by imposing rationality axioms on consumer preferences and mathematically modeling and analyzing the consequences. The utility maximization problem serves not only as the mathematical foundation of consumer theory but as a metaphysical explanation of it as well; that is, the utility maximization problem is used by economists to not only explain what or how individuals make choices but why individuals make choices as well. The utility maximization problem is a constrained optimization problem in which an individual seeks to maximize utility subject to a budget constraint. Economists use the extreme value theorem to guarantee that a solution to the utility maximization problem exists; that is, since the budget constraint is both bounded and closed, a solution to the utility maximization problem exists. Economists call the solution to the utility maximization problem a Walrasian demand function or correspondence; the utility maximization problem has so far been developed by taking consumer tastes as the primitive.
However, an alternative way to develop microeconomic theory is by taking consumer choice as the primitive. This model of microeconomic theory is referred to as revealed preference theory; the theory of supply and demand assumes that markets are competitive. This implies that there are many buyers and sellers in the market and none of them have the capacity to influence prices of goods and services. In many real-life transactions, the assumption fails because some individual buyers or sellers have the ability to influence prices. Quite a sophisticated analysis is required to understand the demand-supply equation of a good model. However, the theory works well in situations meeting these assumptions. Mainstream economics does not assume a priori that markets are preferable to other forms of social organization. In fact, much analysis is devoted to cases where market failures lead to resource allocation, suboptimal and creates deadweight loss. A classic example of suboptimal resource allocation is that of a public good.
In such cases, economists may attempt to find policies that avoid waste, either directly by government control, indirectly by regulation that induces market participants to act in a manner consistent with optimal welfare, or by creating "missing markets" to enable efficient trading where none had existed. This is studied in the field of public choice theory. "Optimal welfare" takes on a Paretian norm, a mathematical application of the Kaldor–Hicks method. This can diverge from the Utilitarian goal of maximizing utility because it does not consider the distribution of goods between people. Market failure in positive economics is limited in implications without mixing the belief of the economist and their theory; the demand for various commodities by individuals is thought of as the outcome of a utility-maximizing process, with each individual trying to maximize their own utility under a budget constraint and a given consumption set. The study of microeconomics involves several "key" areas: Supply and demand is an economic model of price determination in a competitive market.
It concludes that in a competitive market with no externalities, per unit taxes, or price controls, the unit price for a particular good is the price at which the quantity demanded by consumers equals the quantity supplied by producers. This price results in a stable economic equilibrium. Elasticity is the measurement of how resp
Annual general meeting
An annual general meeting is a meeting of the general membership of an organization. These organizations include membership companies with shareholders; these meetings may be required by law or by the constitution, charter, or by-laws governing the body. The meetings are held to conduct business on behalf of the company. An organization may conduct its business at the annual general meeting; the business may include electing a board of directors, making important decisions regarding the organization, informing the members of previous and future activities. At this meeting, the shareholders and partners may receive copies of the company's accounts, review fiscal information for the past year, ask any questions regarding the directions the business will take in the future. At the annual general meeting, the president or chairman of the organization presides over the meeting and may give an overall status of the organization; the secretary may be asked to read important papers. The treasurer may present a financial report.
Other officers, the board of directors, committees may give their reports. Attending this meeting are the members or the shareholders of the organization, depending on the type of organization. At such meeting, the Company Secretary of the Company plays a crucial role in convening, to attend the meeting, he supported by his Corporate Secretarial team. Every state requires public companies incorporated within it to hold an annual general meeting of shareholders to elect the Board of Directors and transact other business that requires shareholder approval. Notice of the annual general meeting must be in writing and is subject to a minimum notice period that varies by state. In 2007, the Securities and Exchange Commission voted to require all public companies to make their annual meeting materials available online; the final rules required compliance by large accelerated filers beginning on January 1, 2008, by all other filers beginning on January 1, 2009 The "e-proxy" rules allow two methods for companies to deliver their proxy materials, the "notice only" option or the "full set" option.
Under the notice only option, the company must post all of its proxy materials on a publicly accessible website at the time In India, the Companies Act 2013 regulates the requirement to conduct an Annual meeting of the members to discuss the four ordinary businesses. As per section 96 of the Act, every Company requires to conduct such a meeting by served a notice of 21 days minimum length prior to the meeting either at the latest known address or email id of the members. However, a company may conduct such meeting through the issue of a notice of shorter length with prior approval of not less than 95 % of the members entitled to vote at such meeting; the Act mandates that such meeting shall be within prescribed time 9:00 am to 6:00 pm, to be not held on national holidays, to be conducted at the place/ town/ village where the registered office of the company situated. However, in the recent trends, as per the latest amendment notified by the Corporate Affairs ministry in India, the unlisted public companies may conduct such meeting in any part of India by taking in advance unanimous approval from all the members in writing or electronically.
The four business includes 1) Financial statement approval 2) Appointment of Director 3) Appointment & to fix the remuneration of statutory auditor 4) Declare the dividend In Great Britain it became optional with effect from 1 October 2007 for any private company to hold an AGM, unless its articles of association require it to do so. In India, the Companies Act 2013 regulates the requirement to conduct a meeting of its members have participation/ hold in the share capital of the company to meet on annual basis in a general meeting called Annual General Meeting within the prescribed time window of 9:00 am to 6:00 pm on other than national holidays to discuss some important business includes financial statements approval. Unlike the other countries, every Company incorporated in India require to conduct such meeting on or before the due date on the last day of the sixth month of every closing of the financial year. In India, the Act has been gone under major changes; the Corporate Affairs ministry has enforced a new amendment act'Companies 2nd Amendment Act 2017' from 26th January 2018.
It gives an option to conduct such meeting in any part of India. In Singapore, only public companies must hold AGMs. With effect from 31 August 2018, private limited companies can decide. Private companies can be exempted from holding AGMs if they send their financial statements to their members within five months after the financial year end. To dispense with AGMs, company members need to pass a resolution. All the shareholders must endorse the document for it to come into force. Having dispensed with AGMs, companies pass written resolutions on matters that would otherwise be discussed at AGMs. Financial statements are the principal subject; the resolution putting an end to AGMs may cease to be in force – members can adopt a new resolution to revoke the dispensation. In this case, an AGM must be held. If a private company decides to have AGMs, it must adhere to the deadlines; the annual general meeting must be held within 6 months after the FYE. Next, every company must lodge the obligatory annual return within 1 month after its AGM.
Convention Extraordinary general meeting Corporate law
Insurance is a means of protection from financial loss. It is a form of risk management used to hedge against the risk of a contingent or uncertain loss. An entity which provides insurance is known as an insurer, insurance company, insurance carrier or underwriter. A person or entity who buys insurance is known as a policyholder; the insurance transaction involves the insured assuming a guaranteed and known small loss in the form of payment to the insurer in exchange for the insurer's promise to compensate the insured in the event of a covered loss. The loss may or may not be financial, but it must be reducible to financial terms, involves something in which the insured has an insurable interest established by ownership, possession, or pre-existing relationship; the insured receives a contract, called the insurance policy, which details the conditions and circumstances under which the insurer will compensate the insured. The amount of money charged by the insurer to the Policyholder for the coverage set forth in the insurance policy is called the premium.
If the insured experiences a loss, covered by the insurance policy, the insured submits a claim to the insurer for processing by a claims adjuster. The insurer may hedge its own risk by taking out reinsurance, whereby another insurance company agrees to carry some of the risk if the primary insurer deems the risk too large for it to carry. Methods for transferring or distributing risk were practiced by Chinese and Babylonian traders as long ago as the 3rd and 2nd millennia BC, respectively. Chinese merchants travelling treacherous river rapids would redistribute their wares across many vessels to limit the loss due to any single vessel's capsizing; the Babylonians developed a system, recorded in the famous Code of Hammurabi, c. 1750 BC, practiced by early Mediterranean sailing merchants. If a merchant received a loan to fund his shipment, he would pay the lender an additional sum in exchange for the lender's guarantee to cancel the loan should the shipment be stolen, or lost at sea. Circa 800 BC, the inhabitants of Rhodes created the'general average'.
This allowed groups of merchants to pay to insure their goods being shipped together. The collected premiums would be used to reimburse any merchant whose goods were jettisoned during transport, whether due to storm or sinkage. Separate insurance contracts were invented in Genoa in the 14th century, as were insurance pools backed by pledges of landed estates; the first known insurance contract dates from Genoa in 1347, in the next century maritime insurance developed and premiums were intuitively varied with risks. These new insurance contracts allowed insurance to be separated from investment, a separation of roles that first proved useful in marine insurance. Insurance became far more sophisticated in Enlightenment era Europe, specialized varieties developed. Property insurance as we know it today can be traced to the Great Fire of London, which in 1666 devoured more than 13,000 houses; the devastating effects of the fire converted the development of insurance "from a matter of convenience into one of urgency, a change of opinion reflected in Sir Christopher Wren's inclusion of a site for'the Insurance Office' in his new plan for London in 1667."
A number of attempted fire insurance schemes came to nothing, but in 1681, economist Nicholas Barbon and eleven associates established the first fire insurance company, the "Insurance Office for Houses," at the back of the Royal Exchange to insure brick and frame homes. 5,000 homes were insured by his Insurance Office. At the same time, the first insurance schemes for the underwriting of business ventures became available. By the end of the seventeenth century, London's growing importance as a center for trade was increasing demand for marine insurance. In the late 1680s, Edward Lloyd opened a coffee house, which became the meeting place for parties in the shipping industry wishing to insure cargoes and ships, those willing to underwrite such ventures; these informal beginnings led to the establishment of the insurance market Lloyd's of London and several related shipping and insurance businesses. The first life insurance policies were taken out in the early 18th century; the first company to offer life insurance was the Amicable Society for a Perpetual Assurance Office, founded in London in 1706 by William Talbot and Sir Thomas Allen.
Edward Rowe Mores established the Society for Equitable Assurances on Lives and Survivorship in 1762. It was the world's first mutual insurer and it pioneered age based premiums based on mortality rate laying "the framework for scientific insurance practice and development" and "the basis of modern life assurance upon which all life assurance schemes were subsequently based."In the late 19th century "accident insurance" began to become available. The first company to offer accident insurance was the Railway Passengers Assurance Company, formed in 1848 in England to insure against the rising number of fatalities on the nascent railway system. By the late 19th century governments began to initiate national insurance programs against sickness and old age. Germany built on a tradition of welfare programs in Prussia and Saxony that began as early as in the 1840s. In the 1880s Chancellor Otto von Bismarck introduced old age pensions, accident insurance and medical care that formed the basis for Germany's welfare state.
In Britain more extensive legislation was introduced by the Liberal government in the 1911 National Insurance Act. This gave the British working classes the first contributory system of insurance against illness and unemployment; this system was expanded after the Second World War under the inf
Econometrics is the application of statistical methods to economic data in order to give empirical content to economic relationships. More it is "the quantitative analysis of actual economic phenomena based on the concurrent development of theory and observation, related by appropriate methods of inference". An introductory economics textbook describes econometrics as allowing economists "to sift through mountains of data to extract simple relationships"; the first known use of the term "econometrics" was by Polish economist Paweł Ciompa in 1910. Jan Tinbergen is considered by many to be one of the founding fathers of econometrics. Ragnar Frisch is credited with coining the term in the sense. A basic tool for econometrics is the multiple linear regression model. Econometric theory uses statistical theory and mathematical statistics to evaluate and develop econometric methods. Econometricians try to find estimators that have desirable statistical properties including unbiasedness and consistency.
Applied econometrics uses theoretical econometrics and real-world data for assessing economic theories, developing econometric models, analysing economic history, forecasting. A basic tool for econometrics is the multiple linear regression model. In modern econometrics, other statistical tools are used, but linear regression is still the most used starting point for an analysis. Estimating a linear regression on two variables can be visualised as fitting a line through data points representing paired values of the independent and dependent variables. For example, consider Okun's law, which relates GDP growth to the unemployment rate; this relationship is represented in a linear regression where the change in unemployment rate is a function of an intercept, a given value of GDP growth multiplied by a slope coefficient β 1 and an error term, ε: Δ Unemployment = β 0 + β 1 Growth + ε. The unknown parameters β β 1 can be estimated. Here β 1 is estimated to be −1.77 and β 0 is estimated to be 0.83.
This means that if GDP growth increased by one percentage point, the unemployment rate would be predicted to drop by 1.77 points. The model could be tested for statistical significance as to whether an increase in growth is associated with a decrease in the unemployment, as hypothesized. If the estimate of β 1 were not different from 0, the test would fail to find evidence that changes in the growth rate and unemployment rate were related; the variance in a prediction of the dependent variable as a function of the independent variable is given in polynomial least squares. Econometric theory uses statistical theory and mathematical statistics to evaluate and develop econometric methods. Econometricians try to find estimators that have desirable statistical properties including unbiasedness and consistency. An estimator is unbiased. Ordinary least squares is used for estimation since it provides the BLUE or "best linear unbiased estimator" given the Gauss-Markov assumptions; when these assumptions are violated or other statistical properties are desired, other estimation techniques such as maximum likelihood estimation, generalized method of moments, or generalized least squares are used.
Estimators that incorporate prior beliefs are advocated by those who favour Bayesian statistics over traditional, classical or "frequentist" approaches. Applied econometrics uses theoretical econometrics and real-world data for assessing economic theories, developing econometric models, analysing economic history, forecasting. Econometrics may use standard statistical models to study economic questions, but most they are with observational data, rather than in controlled experiments. In this, the design of observational studies in econometrics is similar to the design of studies in other observational disciplines, such as astronomy, epidemiology and political science. Analysis of data from an observational study is guided by the study protocol, although exploratory data analysis may be useful for generating new hypotheses. Economics analyses systems of equations and inequalities, such as supply and demand hypothesized to be in equilibrium; the field of econometrics has developed methods for identification and estimation of simultaneous-equation models.
These methods are analogous to methods used in other areas of science, such as the field of system identification in systems analysis and control theory. Such methods may allow researchers to estimate models and investigate their empirical consequences, without directly manipulating the system. One of the fundamental statistical methods used by econometricians is regression analysis. Regression methods are important i
The chairman is the highest officer of an organized group such as a board, a committee, or a deliberative assembly. The person holding the office is elected or appointed by the members of the group, the chairman presides over meetings of the assembled group and conducts its business in an orderly fashion. In some organizations, the chairman position is called president, in others, where a board appoints a president, the two different terms are used for distinctly different positions. Other terms sometimes used for the office and its holder include chair, chairwoman, presiding officer, moderator and convenor; the chairman of a parliamentary chamber is called the speaker. The term chair is sometimes used in lieu of chairman, in response to criticisms that using chairman is sexist, it is used today, has been used as a substitute for chairman since the middle of the 17th century, with its earliest citation in the Oxford English Dictionary dated 1658–1659, only four years after the first citation for chairman.
Major dictionaries state that the word derives from a person. A 1994 Canadian study found the Toronto Star newspaper referring to most presiding men as "chairman", to most presiding women as "chairperson" or as "chairwoman"; the Chronicle of Higher Education uses "chairman" for men and "chairperson" for women. An analysis of the British National Corpus found chairman used 1,142 times, chairperson 130 times and chairwoman 68 times; the National Association of Parliamentarians adopted a resolution in 1975 discouraging the use of “chairperson” and rescinded it in 2017. The Wall Street Journal, The New York Times and United Press International all use "chairwoman" or "chairman" when referring to women, forbid use of "chair" or of "chairperson" except in direct quotations. In World Schools Style debating, male chairs are called "Mr. Chairman" and female chairs are called "Madame Chair"; the FranklinCovey Style Guide for Business and Technical Communication, as well as the American Psychological Association style guide, advocate using "chair" or "chairperson", rather than "chairman".
The Oxford Dictionary of American Usage and Style suggests that the gender-neutral forms are gaining ground. It advocates using "chair" to refer both to women; the Telegraph style guide bans the use of both "Chair" and "Chairperson" on the basis that "Chairman" is correct English. The word chair can refer to the place from which the holder of the office presides, whether on a chair, at a lectern, or elsewhere. During meetings, the person presiding is said to be "in the chair" and is referred to as "the chair". Parliamentary procedure requires that members address the "chair" as "Mr. Chairman" rather than using a name – one of many customs intended to maintain the presiding officer's impartiality and to ensure an objective and impersonal approach. In the United States, the presiding officer of the lower house of a legislative body, such as the House of Representatives, is titled the Speaker, while the upper house, such as the Senate, is chaired by a President. In his 1992 State of the Union address, then-U.
S. President George H. W. Bush used "chairman" for men and "chair" for women. In the British music hall tradition, the Chairman was the master of ceremonies who announced the performances and was responsible for controlling any rowdy elements in the audience; the role was popularised on British TV in the 1960s and 1970s by Leonard Sachs, the Chairman on the variety show The Good Old Days."Chairman" as a quasi-title gained particular resonance when socialist states from 1917 onward shunned more traditional leadership labels and stressed the collective control of soviets by beginning to refer to executive figureheads as "Chairman of the X Committee". Vladimir Lenin, for example functioned as the head of Soviet Russia not as tsar or as president but in roles such as "Chairman of the Council of People's Commissars of the Russian SFSR". Note in particular the popular standard method for referring to Mao Zedong: "Chairman Mao". In addition to the administrative or executive duties in organizations, the chairman has the duties of presiding over meetings.
Such duties at meetings include: Calling the meeting to order Determining if a quorum is present Announcing the items on the order of business or agenda as they come up Recognition of members to have the floor Enforcing the rules of the group Putting questions to a vote Adjourning the meetingWhile presiding, the chairman should remain impartial and not interrupt a speaker if the speaker has the floor and is following the rules of the group. In committees or small boards, the chairman votes along with the other members. However, in assemblies or larger boards, the chairman should vote only when it can affect the result. At a meeting, the chairman only has one vote; the powers of the chairman vary across organizations. In some organizations the chairman has the authority to hire staff and make financial decisions, while in others the chairman only makes recommendations to a board of directors, still others the chairman has no executive powers and is a spokesman for the organization; the amount of power given to the chairman depends on the type of organization, its structure, the rules it has created for itself.
If the chairman exceeds the given authority, engages in misconduct, or fails to perform t
Accounting or accountancy is the measurement and communication of financial information about economic entities such as businesses and corporations. The modern field was established by the Italian mathematician Luca Pacioli in 1494. Accounting, called the "language of business", measures the results of an organization's economic activities and conveys this information to a variety of users, including investors, creditors and regulators. Practitioners of accounting are known as accountants; the terms "accounting" and "financial reporting" are used as synonyms. Accounting can be divided into several fields including financial accounting, management accounting, external auditing, tax accounting and cost accounting. Accounting information systems are designed to support related activities. Financial accounting focuses on the reporting of an organization's financial information, including the preparation of financial statements, to the external users of the information, such as investors and suppliers.
The recording of financial transactions, so that summaries of the financials may be presented in financial reports, is known as bookkeeping, of which double-entry bookkeeping is the most common system. Accounting is facilitated by accounting organizations such as standard-setters, accounting firms and professional bodies. Financial statements are audited by accounting firms, are prepared in accordance with accepted accounting principles. GAAP is set by various standard-setting organizations such as the Financial Accounting Standards Board in the United States and the Financial Reporting Council in the United Kingdom; as of 2012, "all major economies" have plans to converge towards or adopt the International Financial Reporting Standards. The history of accounting is thousands of years old and can be traced to ancient civilizations; the early development of accounting dates back to ancient Mesopotamia, is related to developments in writing and money. By the time of Emperor Augustus, the Roman government had access to detailed financial information.
Double-entry bookkeeping was pioneered in the Jewish community of the early-medieval Middle East and was further refined in medieval Europe. With the development of joint-stock companies, accounting split into financial accounting and management accounting; the first work on a double-entry bookkeeping system was published by Luca Pacioli. Accounting began to transition into an organized profession in the nineteenth century, with local professional bodies in England merging to form the Institute of Chartered Accountants in England and Wales in 1880. Both the words accounting and accountancy were in use in Great Britain by the mid-1800s, are derived from the words accompting and accountantship used in the 18th century. In Middle English the verb "to account" had the form accounten, derived from the Old French word aconter, in turn related to the Vulgar Latin word computare, meaning "to reckon"; the base of computare is putare, which "variously meant to prune, to purify, to correct an account, hence, to count or calculate, as well as to think."The word "accountant" is derived from the French word compter, derived from the Italian and Latin word computare.
The word was written in English as "accomptant", but in process of time the word, always pronounced by dropping the "p", became changed both in pronunciation and in orthography to its present form. Accounting has variously been defined as the keeping or preparation of the financial records of an entity, the analysis and reporting of such records and "the principles and procedures of accounting". Accountancy refers to the occupation or profession of an accountant in British English. Accounting has several subfields or subject areas, including financial accounting, management accounting, auditing and accounting information systems. Financial accounting focuses on the reporting of an organization's financial information to external users of the information, such as investors, potential investors and creditors, it calculates and records business transactions and prepares financial statements for the external users in accordance with accepted accounting principles. GAAP, in turn, arises from the wide agreement between accounting theory and practice, change over time to meet the needs of decision-makers.
Financial accounting produces past-oriented reports—for example the financial statements prepared in 2006 reports on performance in 2005—on an annual or quarterly basis about the organization as a whole. This branch of accounting is studied as part of the board exams for qualifying as an actuary; these two types of professionals and actuaries, have created a culture of being archrivals. Management accounting focuses on the measurement and reporting of information that can help managers in making decisions to fulfill the goals of an organization. In management accounting, internal measures and reports are based on cost-benefit analysis, are not required to follow the accepted accounting principle. In 2014 CIMA created the Global Management Accounting Principles; the result of research from across 20 countries in five continents, the principles aim to guide best practice in the d
Financial statements are formal records of the financial activities and position of a business, person, or other entity. Relevant financial information is presented in a structured manner and in a form, easy to understand, they include four basic financial statements accompanied by a management discussion and analysis: A balance sheet or statement of financial position, reports on a company's assets and owners equity at a given point in time. An income statement—or profit and loss report, or statement of comprehensive income, or statement of revenue & expense—reports on a company's income and profits over a stated period of time. A profit and loss statement provides information on the operation of the enterprise; these include the various expenses incurred during the stated period. A statement of changes in equity or equity statement, or statement of retained earnings, reports on the changes in equity of the company over a stated period of time. A cash flow statement reports on a company's cash flow activities its operating and financing activities over a stated period of time.
For large corporations, these statements may be complex and may include an extensive set of footnotes to the financial statements and management discussion and analysis. The notes describe each item on the balance sheet, income statement and cash flow statement in further detail. Notes to financial statements are considered an integral part of the financial statements. "The objective of financial statements is to provide information about the financial position and changes in financial position of an enterprise, useful to a wide range of users in making economic decisions." Financial statements should be understandable, relevant and comparable. Reported assets, equity and expenses are directly related to an organization's financial position. Financial statements are intended to be understandable by readers who have "a reasonable knowledge of business and economic activities and accounting and who are willing to study the information diligently." Financial statements may be used by users for different purposes: Owners and managers require financial statements to make important business decisions that affect its continued operations.
Financial analysis is performed on these statements to provide management with a more detailed understanding of the figures. These statements are used as part of management's annual report to the stockholders. Employees need these reports in making collective bargaining agreements with the management, in the case of labor unions or for individuals in discussing their compensation and rankings. Prospective investors make use of financial statements to assess the viability of investing in a business. Financial analyses are used by investors and are prepared by professionals, thus providing them with the basis for making investment decisions. Financial institutions use them to decide whether to grant a company with fresh working capital or extend debt securities to finance expansion and other significant expenditures. Consolidated financial statements are defined as "Financial statements of a group in which the assets, equity, income and cash flows of the parent and its subsidiaries are presented as those of a single economic entity", according to International Accounting Standard 27 "Consolidated and separate financial statements", International Financial Reporting Standard 10 "Consolidated financial statements".
The rules for the recording and presentation of government financial statements may be different from those required for business and for non-profit organizations. They may use either of two accounting methods: accrual accounting, or cost accounting, or a combination of the two. A complete set of chart of accounts is used, different from the chart of a profit-oriented business. Personal financial statements may be required from persons applying for a personal loan or financial aid. A personal financial statement consists of a single form for reporting held assets and liabilities, or personal sources of income and expenses, or both; the form to be filled out is determined by the organization supplying the aid. Although laws differ from country to country, an audit of the financial statements of a public company is required for investment and tax purposes; these are performed by independent accountants or auditing firms. Results of the audit are summarized in an audit report that either provide an unqualified opinion on the financial statements or qualifications as to its fairness and accuracy.
The audit opinion on the financial statements is included in the annual report. There has been much legal debate over. Since audit reports tend to be addressed to the current shareholders, it is thought that they owe a legal duty of care to them, but this may not be the case as determined by common law precedent. In Canada, auditors are liable only to investors using a prospectus to buy shares in the primary market. In the United Kingdom, they have been held liable to potential investors when the auditor was aware of the potential investor and how they would use the information in the financial statements. Nowadays auditors tend to include in their report liability restrict