The Three Lens Theory: A Reliable Assessment of Activity?
Posted: Sun Dec 22, 2024 6:53 am
Financial statements are a document that reflects the company's processes. They contain a compilation of information about the company's assets and its sources of financing (financial balance sheet and statement of changes in equity), the economic benefits obtained by the company during the reporting period (profit and loss account) and the state and movement of the treasury during the period (statement of cash flows). In addition to these elements, the complete financial statements also contain notes, where the figures contained in the aforementioned sections are explained.
The structure of financial statements allows the company to be evaluated from three points of view, or as Prof.
J. Ostaszewski, to look at them taiwan phone code through "an eyepiece made up of three lenses."
The three-lens theory involves observing a company from three aspects:
Each of the lenses individually reveals a certain piece of knowledge about the company, but only by looking through all of them can a complete and reliable assessment be made, which is why they are increasingly used to assess a company's situation.
In small companies whose financial statements are not subject to mandatory audit by auditors, the report may be limited only to the balance sheet, the profit and loss account and the notes
Accounting Law of 29 September 2004, as amended).
The Three Lens Theory and the Income Statement
The first lens allows us to analyse the economic aspect, which covers all phenomena related to profits, losses, cost of sales, return on capital and sales revenue. In financial statements, these categories correspond to the profit and loss account. Among other things, this account shows the value of operating activities.
In the economic aspect of the three-lens theory, operating profit occupies a very important position due to its informative value considered on three levels:
In the event of operating losses in the financial year, the company is certain that its core business is not profitable and can take steps to rectify the situation;
The concept of operating profit makes it possible to identify which aspect of the company's activity the revealed problem is related to;
Operating profit is the basis for constructing profitability measures that offer the opportunity to compare companies within the same sector, while ignoring differences in their financial structures.
The structure of financial statements allows the company to be evaluated from three points of view, or as Prof.
J. Ostaszewski, to look at them taiwan phone code through "an eyepiece made up of three lenses."
The three-lens theory involves observing a company from three aspects:
Each of the lenses individually reveals a certain piece of knowledge about the company, but only by looking through all of them can a complete and reliable assessment be made, which is why they are increasingly used to assess a company's situation.
In small companies whose financial statements are not subject to mandatory audit by auditors, the report may be limited only to the balance sheet, the profit and loss account and the notes
Accounting Law of 29 September 2004, as amended).
The Three Lens Theory and the Income Statement
The first lens allows us to analyse the economic aspect, which covers all phenomena related to profits, losses, cost of sales, return on capital and sales revenue. In financial statements, these categories correspond to the profit and loss account. Among other things, this account shows the value of operating activities.
In the economic aspect of the three-lens theory, operating profit occupies a very important position due to its informative value considered on three levels:
In the event of operating losses in the financial year, the company is certain that its core business is not profitable and can take steps to rectify the situation;
The concept of operating profit makes it possible to identify which aspect of the company's activity the revealed problem is related to;
Operating profit is the basis for constructing profitability measures that offer the opportunity to compare companies within the same sector, while ignoring differences in their financial structures.