Question

Give a rationale for "The use of financial statements for business valuation" between 250-300 words

Answer 1

Financial statement is the statement consist of accounting data and prepared at the end of the accounting year. It is characterize as a medium of communicating accounting information of company to the external or internal users. It includes-

• Balance sheet
• Statement of profit and loss
• Notes to accounts

Every company’s financial statements tell a story about the value of the business. Users will get financial performance of a company, i.e. revenue, expenses and profit t or loss for the period. It shows the financial position at the specific point of time. The financial statement of balance of balance sheet addresses such issues by providing detailed information about a company’s asset investments. Moreover, a company also incurs cash inflows and outflows during the period from other non-operating activities, namely investing and financing. Hence cash flow can also be figure out from financial statements.