Research Paper Sample: Financial Reporting and Analysis of Sherwin William Company

Sherwin William Company is an American Fortune 500 company which specializes in the production and manufacture of paints and coating. It mainly operates in divergent segments such as consumer groups, paint groups, global finishes group, administrative and Latin American group. During its management, it indulges in the reporting of financial performance which enables them to convince the investors and other key stakeholders of the business. The company uses the financial statements such as the balance sheet, cash flow statement, income statements and books of original entry. In the income statements, the value of assets both fixed and non-fixed, liabilities and equity of the firm are reported. The account receivables are recorded when they are collected and the collection period is identified by the use of collection day ratios. These give the investors confidence so as to ensure that the whole processes meet the required formats as outlined in the International Accounting Policies. These policies guide them in the process of recording the proceeds of the business, derivatives as the firm participate in the stock market, cash and cash equivalents, the investments which are available for sale, plants and equipment and other assets and expenses which accrue in the company.

Besides, in the process of recording the financial data, the company also uses various accounting principles such as the going on concern principle, consistency principles, costs principles, accrual principles, matching principles, full disclosure principles and revenue recognition principles. These give confidence in the management of the company either in the short or long run. These thus ensure that the whole system meets the requirement as it is stipulated in the Generally Accepted Accounting Principles thus meet the needs of the investors and other users. In the management of their inventory, the company uses the LIFO/FIFO method to distribute the inventories which are in their warehouse thus ensured higher accountability of the resources and sales of the coatings and paints.

In the event of analyzing the capital mix, the company normally uses the Capital the debt to equity ratio of 0.64. It thus shows that the company currently uses more debt than the way they use equity. The capital budgeting technique used to aid in the determination of both systematic and unsystematic risks is CAPM. Besides, the revenues which are attributed to the sales are recorded mainly when they are earned and the expenses accrued are also recorded when they are paid. The company is prompt in paying its suppliers so as to avoid any defaults which arise from liquidity issues. The management of finances especially the petty cash is aided by the preparation of books of original entries such as journals, ledgers, and cashbooks. The information aids in the retrieval of information which is to be used during of the major financial statements of the company. Besides, indulge in the preparation which breaks down the cash flow from operating, income and financial activities hence achievement of the set objectives which is efficiency in financial management. Therefore in terms of performance, the company has been carrying out the analysis with the financial ratios which enables them to overcome various scenarios which can enable them to meet the needs and obligations which might accrue in the market realm. It is through transparency in the financial reporting which has enabled it to gain high reputation hence enjoying both competitive and comparative advantage.

References

Greuning, H, Scott, D., & Terblanche, S. (2011). International financial reporting standards: A practical guide. Washington, DC: World Bank.

http://investors.sherwin-williams.com/pdf/annual-reports/2015_annual_report.pdf. (n.d.). Retrieved from http://investors.sherwin-williams.com/pdf/annual-reports/2015_annual_report.pdf

Income Statement for Sherwin-Williams Co (SHW) from Morningstar.com. (n.d.). Retrieved from http://financials.morningstar.com/income-statement/is.html?t=SHW

Revsine, L., & Mittelstaedt, F. (2017). Financial reporting and analysis. Dubuque: McGraw-Hill Education.