Question

In: Accounting

Discuss how a company’s primary financial statements are useful to potential investors who are trying to...

Discuss how a company’s primary financial statements are useful to potential investors who are trying to decide whether to buy stock in the company. Support your discussion by citing objectives outlined in the Conceptual Framework.

Solutions

Expert Solution

The Primary objectives of financial statements are

Provide information useful in investment and credit analysis and thereby taking decisions by investors who can invest in the business

Provide information useful in assessing future cash flows

Provide Information about enterprise resources and changes happens within the company

The Primary Financial statements of company are useful in analysing; forecasting, assessing, and help out the investor whether investing in the company or industry can help to maximize the returns on the investment.

The balance sheet of the company help to understand and apply the different financial ratios and thereby helping out to get the information regarding the trend of the company thereby helping out to understand the financial performance and credibility of the company and Extent of investment can we make.

The Financial statements help out in analysing the cash available with company, the cash available with the company is sufficient to meet the immediate obligations and long term obligations as well

The financial statements can help to understand the resources available with the company and the changes made by the company and capital structure and their investment returns on each product or segment of the company and thereby understands profitability of whole company.

ekkarill92 answered 2 years ago
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