Question

Most of the financial information about an organization is based on information generated from accounting records. The reports and financial statements prepared by accountants

1. can be helpful for the managers of publicly-held companies but are less helpful for small businesses and not-for-profit organizations.
2. seldom depict the accurate situation of the organization and therefore, should be viewed with skepticism.
3. are useful for employees and managers of the company but not for those outside of the organization.
4. provide information that can be used by decision-makers both inside and outside the organization

Answer 1

Answer: Option D

Explanation: In simple words, financial statements refers to the documents which are prepared by the accountants to depict various aspects of a company.

For example - balance sheet shows the financial position, income statements shows the performance over the year while cash flow statement shows the sources and uses of cash and helps in determining liquidity.

These statements are used by investors to evaluate whether the company is a good option to invest or not. Also it helps the inside stakeholders such as employees to know how much profit a company is making so they can ask for salary appraisals or other such benefits.

Hence these statements are used by both the parties.