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Explain usefulness of financial statements to stakeholders

Explain in your own words how Income statements, Cash Flow Statements, Statement of Retained Earnings and Balance Sheets are useful to managers, investors, creditors, and employees.

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Managers want to know about the profitability of their department, division, location or their company. The income statement will provide that data as well as a comparison to other departments or divisions, and a comparison to last year. Compensation structure and bonuses are based on this information too. Managers would read the balance sheet in order to view the financial strength of the company. Managers may be considering expanding product lines, closing plants, moving to new areas, outsourcing work, and any of those decisions might be tempered by the balance sheet of a company. Likewise, cash flow is an indicator of liquidity, or lack of liquidity which also might influence ...

Solution Summary

In a 433 word solution, the response presents a full paragraph in explanation of the value of financial statements to managers, investors, creditors, and employees.