Final answer:
The statement is false; users of financial statements typically need to have at least a basic understanding of financial accounting and business to properly interpret the data provided.
Step-by-step explanation:
The statement that users of financial statements are assumed to need no knowledge of business and financial accounting matters to understand the information contained in financial statements is false. Financial statements are designed to provide a wealth of information about a company's financial performance, but interpreting this information correctly typically requires at least a basic understanding of financial accounting concepts and business operations. This knowledge helps to analyze and contextualize the data within a broader economic and industry-specific framework.
As a firm becomes more established and its business strategy is deemed likely to lead to future profits, detailed personal knowledge of the managers and their business plans becomes less critical for investors. Instead, external investors such as bondholders and shareholders rely on financial statements to make informed decisions. These documents become crucial tools for assessing the company's viability and prospects. They include information on the company's products, revenues, costs, and profits, allowing investors to evaluate the firm's financial health without needing direct personal insight into its managerial team. While financial statements are meant to be comprehensive, they are most effectively utilized by individuals who have a basic understanding of business and accounting principles. This allows users to interpret financial data more effectively and make more informed investment decisions.