Practicing Success
Which of the following is true about the financial statements of a company? |
Statements used for employee evaluations Documents prepared by the government for tax purposes Formal annual reports used to communicate financial information to various external parties Informal reports used for internal purposes only |
Formal annual reports used to communicate financial information to various external parties |
Financial statements serve as essential and formal annual reports utilized by corporate management to convey financial information to both internal and external stakeholders. These external parties include investors, tax authorities, government agencies, and employees. The three primary financial statements are the balance sheet (providing the financial position at the end of the accounting period), the income statement (showing the company's profit and loss), and the cash flow statement (which outlines the inflows and outflows of cash during a specific timeframe). These statements play a crucial role in transparently presenting a company's financial health and performance to all interested parties. |