UNDERSTANDING FINANCIAL STATEMENT
Owners of business organizations are interested in profit maximize Asian for the phones that have invested of to that side as an investment why management Ames to achieving do objectives of the owners(shareholders)
Business activities are therefore aimed at Employing the shareholders capital in the most effective manner.
In employing the shareholders capital and assessing if the capital has been utilize properly, a good knowledge of a financial statement and its component is necessary.
Financial statement is thus a collection of data organized on the basis of logical and consistent accounting principles and procedures showing the financial position of a business enterprises at a particular point in time (balance sheet) or series of activities which have given rise to income and expenditures (income statement) or (profit and loss account) or showing how funds were sourced and applied to the operations of the business spruces and uses of funds or cash flow statement.
Financial statement is important to the management as it helps the management to know the financial position of the firm in comparison to other business and other sector.
Providing management with accurate information enables them to form proper policies for the companies and take correct decisions.
Financial statement is important to the shareholders. These ar owners of the business but do not take active part in the day to day running of the business. So therefore, the financial statement enables the shareholders to understand and know how the company or firm has been running or performing.
Financial statements are the most important source of information for current and prospective customers. They also need it to understand the dividend payout ratio and forecast the future dividends.
Financial statement is also important to the government as they use the financial statement for taxation purpose.
This has been a guide to the Importance of Financial Statements.
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