Regarding Financial Statements?

Question

What are the audiences, purposes, and natures of financial statements and managerial reports? and how can the use of financial accounting information in making informed and ethical business decisions help?

Answer 1

Financial statements are composed of the Income statement, Cash flows, and Balance sheet. The Income statement gives you the profitability performance of a company over a stated period of time. Cash flows merely shows where cash has been put and received over that period of time. Balance sheet is a snapshot of the assets, liabilities and equity at a particular time.

The audience is prospective investors, shareholders, banks, government regulators as primary users, analysts. It is also available to the public. Its purpose is to inform the audience of how the company performed and how much assets/liabilities/equity it currently has.

The financial statements can be used to value a certain company. If you are an investor and you are able to value a certain stock and consider it undervalued, then it is prudent that you purchase this stock and hope for it to increase in the future.

Answer 2

Man you ask for a book. Audiences--- banks, shareholders, other stake holders, govt. Purposes-- Fairly reflect the financial performance and position of the subject organization. Nature- numerical compilation of categorical objective aspects of the organization. The above relates to Financial Statements. Managerial reports- objective analysis of finite categorical information used to evaluate adopted positions and to adjust those positions to better meet goals. Primary use-- to invalidate or validate assumptions and reduce financial risk

Answer 3

There are various stake holders for a co., apart from the share holders, for eg., creditors, employees, bankers etc., They have an interest in the running of the co., and hence in the financial statements of the co.,
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