Communication of financial information is complicated due to varying purposes for its use, absence of a universal financial analysis method, and users' differing levels of financial savvy, compounded by imperfect information in financial markets.
The factors that complicate the communication of financial information to decision makers include: different purposes for which individuals and companies use financial information, no single method of financial analysis that suits all decisions, and the varying levels of financial analysis sophistication among the various users of financial information.
The presence of imperfect information where there are asymmetries in the information possessed by buyers and sellers, notably in financial capital markets, further increases these complications. For instance, those running a firm will usually have more information about the future profits of the firm than outside investors such as shareholders or bondholders. This disparity in information can influence decisions on whether to provide financial capital to the firm.
As a company matures and its information becomes more public, the necessity for investors to know the managers personally diminishes. Consequently, outside investors may become more willing to supply financial capital, as they can rely on publicly available information about the company's performance to make informed investment decisions.