Question

Users of governmental and nonprofit financial reports use financial statements to answer a number of questions. Which of the following can at least partially be answered by reading a government or nonprofit's financial statements?

a. Financial statements can be used to answer all of the aforementioned questions.
b. None of the above.
c. Does the entity have sufficient financial resources to provide a reasonable cushion against near-term revenue shortfalls caused by economic cntraction?
d. What is the likelihood of the entity's ability to pay its short-term and long-term financial obligations?
e. What is the entity's ability to continue to provide a particular level of services?

Answer 1

Financial statements of governmental and nonprofit organizations can provide answers to questions about financial resources, obligations, and service capacity.

Step-by-step explanation:

Financial statements of governmental and nonprofit organizations can provide answers to several questions.

1. Does the entity have sufficient financial resources to provide a reasonable cushion against near-term revenue shortfalls caused by economic contraction?
2. What is the likelihood of the entity's ability to pay its short-term and long-term financial obligations?
3. What is the entity's ability to continue to provide a particular level of services?

By analyzing the financial statements, stakeholders can assess the financial health, stability, and sustainability of the organization in terms of its resources, obligations, and service capacity.