Final answer:
True, the objective of financial statements is to provide crucial information regarding an entity's financial status, which aids various users in making economic decisions. These documents contribute to the transparency in financial capital markets, where banks and other institutions play a significant intermediary role.
Step-by-step explanation:
The objective of financial statements is indeed true as it aims to provide information about the financial position, performance, and changes in financial position of an entity. This information is incredibly useful for a wide range of users in making economic decisions. Financial statements serve a crucial role in the economy by helping users assess the worthiness of firms for investment, credit, and other business decisions.
With a proper reporting structure, financial statements answer the fundamental questions of who, what, when, where, why, and how regarding an entity's financial data. This objective stance ensures the delivery of unbiased and factual information, aiding in the transparency and accountability of financial capital markets.
Banks function as financial intermediaries in these markets, using their balance sheets to manage assets, liabilities, and net worth. They deal with risks such as asset-liability time mismatches and loan defaults, which can critically impact their financial stability. The availability of financial data through statements makes it easier for outside investors like bondholders and shareholders to provide financial capital without personal knowledge of the company's managers.