What is the purpose of financial statements?
A) To disclose the market value of the firm's assets and liabilities.
B) To determine compliance with tax laws.
C) To identify shareholders.
D) To help users make decisions.

Question

Quizplus · Accepted Answer

The purpose of financial statements is to provide information to users, such as investors, creditors, and other stakeholders to help them make informed decisions about the company's financial health, performance, and potential. Financial statements provide details about income, expenses, assets, liabilities, and cash flows. Therefore, option D is the most appropriate choice. Although option A and B partially state the purpose of financial statements, they are not comprehensive. Option C is not correct, as financial statements do not identify shareholders but provide information to them.

What Is the Purpose of Financial Statements