Professional Research a. What is the objective of financial reporting?

The objective of financial reporting is to provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decision about providing resources to the entity. b. What other means are there of communicating information, besides financial statements? To communicate financial information, multidimensional graphics can also be used. This graphic technique helps individuals understand the relationships between financial variables and allow them to identify changes in the trend of firms financial conditions more quickly than statistical models. Aside from this, financial reporting may take various forms like supplementary schedules in the corporate annual report, management's forecasts, and descriptions of a company's social or environmental impact. c. Indicate some of the users and the information they are most directly concerned with in economic decision making? Equity investors Equity investors in an entity are interested in the entitys ability to generate net cash inflows because their decisions relate to the amounts, timing, and uncertainties of those cash flows. They are directly concerned with the ability of the entity to generate net cash inflows and also with how the perception of that ability affects the prices of its equity interests. Creditors Like investors, creditors are interested in the amounts, timing, and uncertainty of an entitys future cash flows. To a creditor, an entity is a

source of cash in the form of interest, repayments of borrowings, and increases in the prices of debt securities. Suppliers Suppliers provide goods or services rather than financial capital. They are interested in assessing the likelihood that amounts an entity owes them will be paid when due. Employees Employees provide services to an entity; employees and their representatives are interested in evaluating the stability, profitability, and growth of their employer. They are interested in information that helps them to assess the entitys continuing ability to pay salaries and wages and to provide incentive payments and retirement and other benefits. Costumers To its customers, an entity is a source of goods or services. Customers are interested in assessing the entitys ability to continue to provide those goods or services, especially if they have a long-term involvement with, or are dependent on, the entity. Governments and their agencies and regulatory bodies Governments and their agencies and regulatory bodies are interested in the activities of an entity because they are in various ways responsible for seeing that economic resources are allocated efficiently. They also need information to help in regulating the activities of entities, determining and applying taxation policies, and preparing national income and similar statistics. Members of the public They are interested in information about the trends and recent developments in the entitys prosperity and the range of its activities, as well as the entitys ability to continue to undertake those activities.