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The Purpose of Financial Statements Financial statements are important for any organization. There is a lot to be harnessed from financial statements with respect to balance sheets, income statements, statement of affairs and statement of equity. Reports from the balance sheet and financial statements often address how the company is faring with respect to its operation and if it is viable or not with respect to profitability respectively. The statement of affairs explains where the business acquired the money to facilitate their operations from. Its use in business is very much significant thus the necessity to have it assembled. Managers make use of these statements by accessing how well the firm has done with respect to registering profits. The findings make a basis for their next course of action. They may reach the decision to make investments after accessing and seeing where they stand to harness huge profits. A conclusion may be arrived at to share the profits between the business and shareholders to correct a situation of loss . Employees may use it to negotiate their enhancement of salaries. The shareholders also receive immense benefits from the financial statements. Their needs to be compensated with respect to their efforts to plough their money in the business is determined by financial statements. The choice to acquire more shares from the company or sell them of is made after they have accessed the financial statements. The creditors interests usually lie on the ability of the entity to settle their account and thus have to ascertain that by looking into the financial statements. There is a surety of debt payment and timeliness that a creditor needs to be assured of before they extend any financial assistance to a company.
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Investors often spell growth for any firm that they are involved in. A glimpse into the financial statements of an entity will help them make a conclusive decision on whether it is a profitable venture. The presence of fluctuating profits may present a case of high risk. This may discourage the investors from coming in or even attract them depending on the kind of business. Customers need the information to verify that the company will be able to carter for their needs for long especially if they are dependent on them for a certain product. The suppliers have to be convinced of the companies ability to carter for its operations so as to be able to issue them goods or services on credit when the need arises. The government is often in a better position to decide the taxes to impose and the incentive to extend after getting a glimpse the financial statements of a particular company.The 10 Commandments of Funds And How Learn More