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Auditors use financial statements in assessing the fair presentation of a company’s financial results. Organizations prepare...

Auditors use financial statements in assessing the fair presentation of a company’s financial results. Organizations prepare four financial statements as part of their reporting process. In your own words, answering the following: List and explain three important uses of financial statements. Explain two reasons for using financial statement analysis.

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Answer #1

List and explain three important uses of financial statements.

  • To prepare information for users of FS for allocation of resources
  • To tale financial decision, investment decision and taxation decision
  • To understand the sources of cash receipts and uses of cash disbursements.

Explain two reasons for using financial statement analysis.

  • To review the liability and take appropriate actions to either reduce the exposure or apply for business expansion loans
  • To give reports to senior management regarding trends in industry, consumer behavior, product segmentation, wholesalers demand and other trends in order to take decisions best suited for company's growth
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