Explain The Goals And Objectives Of Users Of Financial Statements

1.2 Goals and objectives of users of financial statements

The main objective of financial reporting is to provide useful information to investors, creditors, and other interested parties. Financial reporting provides useful information about the firm's economic resources, claims against those resources, owners' equity, and changes in resources and claims. Perfectly, financial reporting provides company shareholders and other stakeholders like employees, communities, customers, and suppliers with information that aids in the prediction of the amounts, timing, and uncertainty of future cash flows.

The main criteria for valid financial statements are that it should provide true and fair information that reflects the real condition and position of the firm, so that profits and revenue are not overstated and losses and expenses are not understated. Such kind of a fair statement would recognize the enterprise's

In the normal course of business dividends may be paid from the company's residual income after the satisfaction of claims of security holders who are entitled to preferential claim (payment of interest on bonds, dividends on preferred shares).

If the company prospers, the holders of ordinary shares have an opportunity to get all the profit, minus a strictly fixed amount of priority obligations and vice versa, if the company is low on funds, they will be the first to take all the damages and losses.

The objectives of the company's management

Financial analysis by the company's management can be performed regularly, as it has unlimited access to the internal accounting data. This analysis covers the changes in trends, computed indicators, the most important dependencies. The management’s primary task is to exercise control over how its company looks like from the point of view of most important creditors and