How to Read, Understand, and Analyze Contractor Financial Reports

摘要

Publicly owned companies prepare annual reports to describe the financialactivities and condition of the company to interested parties such as investors, creditors, and the Securities and Exchange Commission. There are four basic formats presented in these annual reports. These formats are generally referred to as: (1) Balance Sheet; (2) Income Statement; (3) Statement of Cash Flows; and (4) Statement of Retained Earnings. Program Managers and government cost analysts can easily utilize the information from a company's annual reports to analyze the overall financial health and the effectiveness of its operation. In the world of weapon systems acquisition, analyzing the defense contractor's financial status is greatly needed. Government Program Managers an cost analysts must be able to confirm that the companies they deal with are able to meet contractual obligations in terms of cost, schedule, and performance. A careful analysis of the firms financial health through understanding of financial reporting and ratio analysis will place the government in a much better position to accomplish the following: (1) make an intelligence decision on source selection; (2) negotiate proper progress payments; (3) monitor contractor performance after contract award; and (4) evaluate the impact of potential contractor investment.