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Objectives of the financial statements


 


 

The purpose of the financial statements is to clearly and objectively demonstrate the economic, financial and performance position of a particular undertaking or organization. It helps interested parties to understand business movements as well as make right decisions regarding their management.


It ensures that all stakeholders are in tune and make more well-founded decisions regarding business investment management. The objectives of the financial statements were grounded with a view to the capital market structure and their need for information.


Financial statements also provide information on entity, liquidity cash flows, debt structure, profitability, and can still signal based on their possible future crises indicators.


The following points summarize the objectives and purposes of the financial statements:


  • Provide information to the management of an organization that are used for planning, analysis, benchmarking and decision-making purposes;

  • Provide information to investors, promoters, lenders and creditors who enable them to make rational and prudent investment decisions, credit, etc.;

  • Provision of information to shareholders and the general public in the case of companies listed on various aspects of an organization;

  • Providing information on how the results have formed and what their destinations were like, distribution of dividends, debt payment, working capital formation, inventory immobilization, acquisition of permanent assets, among others;

  • Providing information about how an organization is generating and using its resources;

  • Provide information stakeholders in relation to the organization's performance management and how diligent and ethically are fulfilling their duties and responsibilities;

  • Provide information to auditors for analysis of the correction of these reports.

  • Improve social welfare, observing the interests of employees, trade unions and government.


Importance of financial statements


The importance of financial statements can not be underestimated. It may be required by each stakeholder for various reasons and purposes. The following points highlight why the structure of these reports are important.

  • In the provision of accounts to government agencies, banks, shareholders and in the case of listed companies, quarterly and annual results should be filed in the stock exchanges and published.

  • If elaborated in accordance with generally accepted accounting practices, it facilitates the audit process so that they can express their opinion on them.

  • Financial reports are the backbone of financial planning, analysis, benchmarking and decision-making.

  • Financial reports help organizations raise capital, both in the domestic and abroad market.

  • Based on finance, the general public can analyze the performance of the organization as well as its management.

  • For bidding purposes, work contracts, government supplies, etc., organizations must provide their reports and financial statements.


Conclusion


Therefore, we can conclude that the financial statements are extremely important under the points of views of the most varied stakeholders. Even if its process of elaboration is extremely complex, for example, when we deal with large organizations, the benefit of the final report is much more relevant and higher if we compare the complexities originating from its elaboration.


When a company has well-elaborated and correct financial statements, in addition to facilitating its management process allows to attract investors willing to finance good business.


luis Valini

Valini@avaliandoempresas,com


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