[Get Solution] Basic Purpose of Financial Statements

The basic purpose of financial statements is to organize and summarize information on the business and financial conditions of the enterprise. Enterprises can analyze the data in the financial statements of the root zone to understand the financial status of the company and the status of the company’s operations and management. By analyzing the company, you can understand whether the financial situation is good, the company is operating well, the prospects of the company’s business, and the finding of operational problems and seeking solutions. Decision-makers or management believe that financial statements are important. Because financial statements can help decision-makers or management find and solve shortcomings and make decisions. Analysis of financial statements has seven meanings: 1. Communicate effectively with financial department-the management has a timely understanding of the financial status of the enterprise. 2. Make a correct assessment of the company’s operating performance-the management understands the company’s profit or loss status. 3. From a financial point of view, provide support for decision makers-analyze the problems that occurred in the operation of the enterprise and the problems that occurred in previous decisions from a professional perspective to provide solutions. Discover effective decisions from the company’s past data and analyze why the decision brings benefits and enable decision-makers to understand the results of the analysis. Analyze the company’s future financial trends. 4. Understand the three major statements of the enterprise from the different perspectives of owners and operators-there is more than one profit-making enterprise for profit, analyze the profitability data of all parties and understand the profitability of all parties. For example, investors want to know how long it will take to recover the capital, the operating status of the investment project, and whether they should invest more or divest themselves. 5. Quickly identify possible fraud component