16 Questions
What do the shareholders of the company want to assess?
The company's ability to manage the business efficiently
Why do suppliers want to know about the company's financial situation?
To ensure that the company is a secure source of supply
What information do providers of finance, such as banks, want to ensure?
The company's ability to repay debts
Why do the taxation authorities want to know about business profits?
To assess the tax payable by the company
Why should employees of the company have a right to information about the company's financial situation?
Because their future careers and wages depend on it
Who needs information for their clients or audience?
Financial analysts and advisers
What do journalists need information for?
For their reading public
Who is interested in the allocation of resources and therefore in the activities of business entities?
Government and their agencies
What are trade contacts interested in knowing?
That the company is a secure source of supply
Why are credit agencies interested in getting information?
To advise potential creditors about the company
What is the primary objective of financial statements?
To provide information about the financial position, performance, and changes in financial position of an entity
In what situations is the stewardship role particularly important for financial statements?
When there is a separation between ownership and management in an entity
Who are the managers of a company appointed by, and what information do they need from financial statements?
Managers are appointed by the company's owners and they need information about the company's financial situation
For what types of economic decisions are financial statements likely to be used?
Decisions to buy, hold, or sell equity investments
Which users are likely to be interested in financial information about a large company with shares listed on a stock exchange?
Managers of the company and potential investors
What is the significance of providing financial information to a wide range of users?
It ensures accountability and assists in economic decision making
Test your knowledge about the purpose of financial statements and their role in providing information to users for making economic decisions. Understand the stewardship or accountability role of managers in using the resources provided by users.
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