16 Questions
What is the primary objective of financial statements?
To provide information about the financial position and performance of an entity
What role do financial statements play in relation to managers of a company?
To give an account of how managers have used the resources provided by the company's owners
What type of decisions are financial statements likely to be used for?
Decisions to buy, hold or sell equity investments
Who needs information about a large company's financial situation as it is currently and as it is expected to be in the future?
Managers appointed by the company's owners
What is particularly important when there is a separation between ownership and management in an entity?
The stewardship role played by financial statements
What do financial statements provide information about in relation to amounts lent to the entity?
Assessment of the security of amounts lent to the entity
What do shareholders of the company want to assess?
How profitable the company's operations are
Why do suppliers need to know about the company's financial situation?
To know about the company's ability to pay its debts
What information do providers of finance, such as banks, want to ensure?
That the company is able to keep up interest payments
Why do employees of the company have a right to information about the company's financial situation?
Their future careers and wages depend on it
What do financial analysts and advisers need information for?
To advise investors and provide information for their clients or audience
What are trade contacts interested in knowing about the company?
Whether the company is a secure source of supply
What information do credit agencies want?
Information to advise potential suppliers of goods to the company
What are taxation authorities interested in knowing?
The business profits in order to assess the tax payable by the company, including sales taxes
Why are governments interested in business entities' activities?
The allocation of resources by government agencies
What do customers need to know about the company?
Whether the company is a secure source of supply and is in no danger of having to close down
Explore the objectives of financial statements and their stewardship role in providing information about the financial position and performance of an entity. Understand how financial statements serve as a tool for accountability and decision-making for a wide range of users.
Make Your Own Quizzes and Flashcards
Convert your notes into interactive study material.
Get started for free
