Financial Statement

Relevance of Understanding the Financial Statements

Answer explanation

* To understand a company’s business activities to

analyze the effectivity of a company or infer its value.

* To conduct the following activities:

- Plan business activities

- Finance those activities

- Invest in those activities

- Engage in operating activities

General Objectives of Financial Statements

Answer explanation

1. Providing Information for Economic Decisions

2. Providing Information About Financial Position

3. Providing Information About Performance of an

Enterprise

4. Providing Information About Changes in Financial

Position

Current assets are often called __________ because these assets “turn over” or are used and then replaced throughout the year

____________are often called working capital because these assets “turn over” or are used and then replaced throughout the year

the difference between current assets minus current liabilities

The process of extracting information from financial statements to better understand a company’s current and future performance and financial condition

Primary users of the financial accounting information

Answer explanation

1. Managers and Employees

2. Investors and Analysts

3. Creditors and Suppliers

4. Shareholders and Directors

5. Regulatory and Tax agencies

6. Customers and Potential Strategic Partners

7. Other decision makers