Final answer:
Investors and creditors need information to assess the expected rate of return, risk, and liquidity for their investments. Firms can raise capital through various means, each with unique implications for future profitability and information symmetry between investors and the firm.
Step-by-step explanation:
Information should help investors and creditors evaluate the expected rate of return, risk, and liquidity regarding cash receipts and disbursements.
When considering investment in financial assets, it is crucial to understand the differences between expected rate of return, actual rate of return, and the investment's liquidity. This pertains to how readily one can convert financial assets into cash or goods and services.
Firms have various sources to choose from when raising financial capital, such as early-stage investors, reinvesting profits, borrowing through banks or bonds, and selling stock.
Each source has its own implications for risk, return, and future cash flows, and a poor choice can be costly due to imperfect information, where the firm has better knowledge of its potential for profit than the investors.