Abstract
Within the last decades, under the continuous advancement of human commercial civilization, the tide of economic globalization has swept through every corner of the world. Accounting, as a precise “business language”, is in the context of cultural, linguistic and social systems. The disclosure and communication of business information plays a crucial role and is increasingly valued by people from all walks of life. The financial statements, as a major carrier to reflect the financial position, business activities and cash flow of the enterprise, are also affecting the interests of all parties and bearing the extraordinary significance (Berger et al., 2015: p. 2286). Because of this, how to analyze and interpret financial statements has become a topic that needs to be continuously researched and explored in the new century. According to Shopify (2019), financial statements are defined as the accounting form of reflecting on an overall picture of the health of a business, including cash flow statement, the income statement and the balance sheet of the business. It can provide financial position performance and changes for a corporation. Investors or financial workers can uncover financial risk factors from qualitative textual risk disclosures reported in financial statements, especially bank risks.
Highlights
According to Shopify (2019), financial statements are defined as the accounting form of reflecting on an overall picture of the health of a business, including cash flow statement, the income statement and the balance sheet of the business
Investors or financial workers can uncover financial risk factors from qualitative textual risk disclosures reported in financial statements, especially bank risks
Bank risk is defined as a type of business risk which results in the possibility of suffering losses of economy, assets or income due to the influence of uncertainty factors during the process of commercial bank operation, including credit risk, market risk, liquidity risk, legal risk, management risk, interest rate risk and exchange rate risk (Wei et al, 2019: p. 10)
Summary
Bank risk is defined as a type of business risk which results in the possibility of suffering losses of economy, assets or income due to the influence of uncertainty factors during the process of commercial bank operation, including credit risk, market risk, liquidity risk, legal risk, management risk, interest rate risk and exchange rate risk (Wei et al, 2019: p. 10). The left side of the balance sheet reflects the financial status of the enterprise, and the assets are listed in terms of their liquidity from large to small; the right side demonstrates the debt and shareholder equity of the enterprise, indicating the proportion of the source of funds between the creditor and the business owner (Barnes & Warman, 2000). It provides financial information such as the company’s asset structure, asset liquidity, source of funds, debt level, and liability structure.
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More From: American Journal of Industrial and Business Management
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