Which of the following best describes why a firm produces financial statements?
A) to use as a tool when planning future investments within a firm
B) to increase the intrinsic value of a firm
C) to provide a means for interested outside parties such as creditors to obtain information about a firm, with an overview of the short- and long-term financial condition of a business
D) to show the daily activities a firm has undertaken in the previous financial year, and what activities are planned for the near future

Question

Quizplus · Accepted Answer

The primary purpose of financial statements is to provide information to interested outside parties such as creditors, investors, and stakeholders. These statements provide an overview of a firm's financial condition, including its assets, liabilities, income, and expenses, and allow interested parties to evaluate the performance and financial health of the business. Financial statements are not typically used as a tool for planning future investments within a firm or increasing the intrinsic value of a firm. While financial statements do show the daily activities of a firm in a given year, their main purpose is to provide information for interested outside parties rather than for internal planning purposes.

Which of the Following Best Describes Why a Firm Produces