Final answer:
Financial statements have multiple objectives beyond serving just investors and creditors. They provide a comprehensive view of a firm's financial health to various stakeholders and support strategic decision-making, especially as the firm grows and seeks external financing.
Step-by-step explanation:
It is false that the only objective of financial statements is to provide information to current and potential investors and creditors. Financial statements serve a broader purpose, as they offer valuable information about a company's financial performance to a range of stakeholders including management, employees, government agencies, and sometimes the public.
As a firm becomes more established, the availability of information regarding its products, revenues, costs, and profits becomes critical in attracting external financing. While bondholders and shareholders may not know the management personally, financial statements help them assess the company's viability.
Furthermore, in the scenario where a small company is focusing on growth, financial statements might be crucial for making strategic decisions on whether to issue bonds or stocks. For venture capitalists, who often have a significant stake in the firm, financial statements coupled with closer management oversight ensure they have the information needed to judge the firm's management and strategy effectively.