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Effectiveness is the achievement level of the program with the target set or in other words, effectiveness is the comparison between the outcomes with the
output.
D. Analysis of Local Government Financial Statement
To get a picture of a companys financial development, interpretation or analysis of financial data from the company and financial data that will be
reflected in financial reports is needed. It is needed to get to know
whether the financial statements reported the companys position at a certain time and
operations for a period ago. However, the real value of the financial statements is
the fact that financial statements can be used to predict earnings and future dividends Brigham and Houston, 2001.
The interpretation or analysis of a companys financial statements would be very useful for the user of financial report to be able to know the financial
situation and the development of the company concerned. By conducting financial
statement analysis, managers will be able to know the circumstances and the financial development of the company, and will be known to the financial results
achieved in the past and currently running. With a financial analysis from years
past can be known weaknesses and strengths of the company. Furthermore, the
management analysis of financial reports used to anticipate future conditions and functioning as a starting point in planning actions for the future.
The creditor is also put some attention in the financial statements of companies that have been or will be their debtor or their clients.
Before taking a
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decision to give or refuse the demand for credit from a company, the creditor needs to hold a first analysis to measure the companys ability to repay its debts
and also its interest. The long-term creditors are concerned to know whether the
credit will be given a guarantee that enough of the assets, while short-term creditors are more interested in the ability of borrowers to repay the current
liabilities from their current assets. Moreover
, investors are also interested in the financial statements of a company in order to determine capital investment policy.
Rate of return from funds, which will be invested in securities, is most likely to be important for the investor.
From the perspective of investors, financial statements analysis is used to predict the future.
The main function of local government financial statements LKPD is to provide financial information to the parties concerned with those report that will
be used as the basis of economic decision making, social, and political. Although
the characteristic of the financial reports is general purposive, made to be generally accepted and simply easy possible to meet the information needed for of
all parties, but not all readers can understand the report properly. Since not all users of financial statements can understand accounting well,
as they will rely on financial information for decision-making, the inability to understand and interpret financial statements should be assisted with the analysis
of financial statements. Analysis of financial statements are intended to help
understand how the financial statements, how to interpret the figures in the financial statements, how to evaluate financial statements, and how to use
financial information for decision-making.
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There are several methods in the analysis of financial statements. One of the
most widely technique used to analyze the financial statements are the financial ratio analysis.
There are various types of ratios that can be used to evaluate and interpret financial reports.
The results of the calculation of financial ratios have to be interpreted, so that it can evaluate the financial performance of the organization
and then made certain decisions. Some of the ratios to make analysis are the ratio
that is provided by Cohen 2006. Those are ratios that will be used in this research.
E. Hypotheses Development
