Question

Why are financial statements prepared at regular intervals? Who are the users of these statements? DEFINITIC TERM ENGLISH

Answer 1

Financial Statements are prepared at regular intervals because of the following reasons:-

• To get a good understanding of income and costs. To see the areas that need more analysis, and to take action before small problems become big problems (for example, if business expenses are increasing you may need to re-price your goods to continue making a profit).
• To know the asset and liabilities on a particular date. The net worth (also called the 'ownership equity') of the company, which is the difference between the assets and liabilities is the net worth of the business. The net worth shows how much the business is worth to the owners on the day the financial statement was prepared.
• To show where cash is coming from and what it is spent on (with the help of Cash Flow Statement).
• So that the creditor or Investor can easily compare financial statements among companies.

Users of these statements are:-

• Owners of the company.
• Customers.
• Management of the Company.
• Investors.
• Government and Government Agencies.
• Employees.
• Investment Analysts.
• Lenders/Credtors.
• Rating Agency.
• Suppliers.