CFIN
CFIN
6th Edition
ISBN: 9780357144039
Author: BESLEY
Publisher: CENGAGE L
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Chapter 2, Problem 1PROB
Summary Introduction

To determine: What financial information must be shared with people who invest in publicly traded companies and which financial statement provides the best information

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Explanation of Solution

Firms share annual reports with their shareholders which provide two types of information:

  1. Discussion of Operations which contains results of operating activities in the past year and discusses new developments in the company that may impact future operations

  2. Basic financial statements comprising the balance sheet, the income statement, the cashflow statement, and the statement of retained earnings. These statements together provide insights into the operating activities and the financial position of the firm. Detailed information is provided for the previous 2 years and key statistics for the previous 5 to 10 years along with historic summaries.

A cashflow statement provides the best idea about the financial performance and financial position of the firm as it gives information of how funds were generated and how they were used during the financial period.

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