April

 

Professional Research

a. What What is the the objecti objective ve of fina financi ncial al report reporting ing??

The objective of financial reporting is to provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other  creditors in making decision about providing resources to the entity.

 b. What other other means are there there of communicat communicating ing informati information, on, besides besides financial financial statements?

To communicate financial information, multidimensional graphics can also be used. This graphic technique helps he lps individuals understand the relationships between financial variables and allow them to identify changes in the trend of firm’s financial conditions more quickly than statistical models. Aside from this, financial reporting may take various forms like supplementary schedules in the corporate annual report, management's forecasts, and descriptions of a company's social or environmental impact.

c. Indicate Indicate some of the users users and the informa information tion they they are most most directly directly concerned concerned with in economic decision making?

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Equity investors Equity investors in an entity are interested in the entity’s ability to

generate net cash inflows because their decisions relate to the amounts, timing, and uncertainties of those cash flows. They are directly concerned with the ability of the entity to generate net cash inflows and also with how the perception of that ability affects the prices of its equity interests. •

Creditors Like investors, creditors are interested in the amounts, timing, and

uncertainty of an entity’s entity’s future cash flows. To a creditor, an entity is a

 

source of cash in the form of interest, repayments of borrowings, and increases in the prices of debt securities. •

Suppliers Suppliers provide goods or services rather than financial capital. They

are interested in assessing the likelihood that amounts an entity owes them will be paid when due. •

Employees Employees provide services to an entity; employees and their 

representatives are interested in evaluating the stability, profitability, and growth of their employer. employer. They are interested in iinformation nformation that helps them to assess the entity’s continuing ability to pay salaries and wages and to  provide incentive payments and retirement and other benefits. •

Costumers To its customers, an entity is a source of goods good s or services. Customers

are interested in assessing the entity’s ability to continue to provide those goods or services, especially if they have a long-term involvement with, or are dependent on, the entity. •

Governments and their agencies and regulatory bodies Governments and their agencies and regulatory bodies are interested in

the activities of an entity because they are a re in various ways responsible for  seeing that economic resources resources are allocated efficiently. efficiently. They also need information to help in regulating the activities of entities, determining and applying taxation policies, and preparing national na tional income and similar  statistics. •

Members of the public They are interested in information about the trends and recent

developments in the entity’s prosperity and the range of its activities, as well as the entity’s ability to continue to undertake those activities.