Final answer:
Companies require financial statements to present a full picture of their financial status, which is critical for decision-making by investors and stakeholders. Outside investors are often essential for a firm's growth beyond what reinvested profits can provide. Bankruptcy can offer firms a chance to reorganize and become financially viable without ceasing operations.
Step-by-step explanation:
Companies need financial statements because they provide a comprehensive picture of the company's financial health, beyond just cash flow. Financial statements include the balance sheet, income statement, and cash flow statement, which combined, provide insight into a company's profitability, assets, liabilities, and equity, which are crucial for investors and stakeholders to make informed decisions. While cash flow projections are important for understanding the company's liquidity and short-term viability, financial statements are necessary for a holistic view of the company's financial performance over time.
Concerning a company using its own profits for financial capital, it's important to understand that relying solely on profits can limit growth potential. As a firm becomes somewhat established, the need to take on outside investors like bondholders and shareholders may become necessary to fund larger investments and expansion efforts that the firm's own profits may not suffice. This approach also allows firms to leverage external funds to grow without depleting their own resources, and as the firm's financial information becomes widely available, investors are more willing to provide capital.
In the context of companies filing for bankruptcy, many firms in the United States choose to continue operating to restructure their debts and business operations under legal protection. Filing for bankruptcy does not always mean shutting down; rather, through tools like Chapter 11, firms can renegotiate terms with creditors and make operational changes to become profitable again while being shielded from immediate debt repayments and legal actions by creditors.