Final answer:
The statement regarding financial accounting is true, as it provides critical information about a business's performance to external parties for decision-making purposes. Profits, a key factor in financial accounting, are imperative for a firm’s longevity and are calculated by considering both revenues and costs. Additionally, money as a unit of account is essential for measuring values in business transactions.
Step-by-step explanation:
The statement "Financial accounting measures the business activities of a company and communicates those measurements to external parties for decision-making purposes" is true. Financial accounting does indeed focus on recording, summarizing, and reporting financial transactions from a business to outsiders such as investors, creditors, and regulatory agencies. It involves the preparation of financial statements that provide information about a firm's performance to external parties. One of financial accounting's primary objectives is to provide necessary information for decision-making purposes.
Privately owned firms are driven by the goal of earning profits, which is the difference between their revenues and costs. Profits are also a critical indicator of the survivability and success of a business. Accounting profit is calculated by subtracting explicit costs from total revenues, while economic profit takes into account both explicit and implicit costs.
Additionally, the concept of money as a unit of account plays a role in measuring and comparing values within financial accounting. It allows for a common denominator which simplifies trade-offs and enables businesses and external parties to make more informed decisions. Furthermore, understanding real GDP is crucial because it encompasses measurements of production, spending, and income in the economy, serving as a general indicator of economic health.