2. Financial Statements Overview

What Are Financial Statements?

Without a formal communication avenue, how can an organization report its financial status? It is important to communicate with current and potential investors, lenders, and management about an organization’s financial health, so it is crucial to have an industry standard method for doing so. Chapter 1 addressed many ratios and performance measures used to evaluate the company and management performance, which are calculated using financial statements. Without financial statements, decision makers would have no concrete evidence and would simply have to guess how well firms are performing. Financial statements are instruments to report and analyze company performance.

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