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Q: how the financial statements would be useful to external users such as investors and creditors.
A: Investors use financial statements to review the return on their funds. Investors provide funds to companies in exchange for shares of stock. [ They want to see the stock value increase while they hold the shares to increase the value of their investment. Investors review the income statement to see how profitable the company performed. They also review the statement of stockholders equity to
review changes in the company's shares outstanding. Creditors use financial statements to make lending decisions to companies. They look at the income statement, the balance sheet and the statement of cash flows. The income statement communicates how much income the company generated during the period. The balance sheet tells the creditor how its liabilities compare to its equity. Companies with high liabilities already owe a considerable amount of money, impacting the creditor's decision. The statement of cash flows communicates the company's ability to manage its cash, which it needs to meet financial obligations ]
rhey22787|Points 1477|
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Asked 11/29/2012 12:25:28 AM
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