Question

What are the uses and importance of financial statements?

Options

• Basis for fiscal policies

• Report on tewardship·function

• Basis of granting of credit

• All of the above

Answer 1

All of the above.

Explanation:

Report on stewardship function: Financial statements inform shareholders about the performance of management. Financial statements can be used to understand the gaps between management performance and ownership expectations.

Basis for fiscal policies: The financial performance of corporate operations is linked to government fiscal policies, notably taxation policies. The financial accounts serve as a foundation for the government's industrial, taxes, and other economic policies.

Basis for granting of credit: Corporate entities must borrow money from banks and other financial organizations for a variety of reasons. Credit issuing organizations base their choices on the financial performance of the enterprises. Thus, financial statements serve as the foundation for credit approval.