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Why do we evaluate Financial Statements? (Provide 2 examples of internal uses and 2 examples of...

Why do we evaluate Financial Statements? (Provide 2 examples of internal uses and 2 examples of external uses of Financial Statements?

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Answer #1

Financial statement is evaluated by the users for the purpose of decision making. Financial statement shows the financial performance of an entity and conveys the financial position of an entity.

External users evaluate the financial statements for undertanding of overall health of an organization and also for knowing the business value and financial performance.

Internal users use it to know the current financial position and the changes or improvements if any required to made in the financial structure of an organization.

Some examples of external users are:

Banks, suppliers, customers etc

Some examples of internal users are:

Owners, managers, employees etc.

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