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Multiple Choice
The primary objective of financial reporting is to provide information:
A
that ensures the company pays the least amount of taxes possible.
B
that is useful to present and potential investors, creditors, and other users in making rational investment, credit, and similar decisions.
C
that focuses solely on the company's internal management needs.
D
that guarantees the company will be profitable in the future.
Verified step by step guidance
1
Understand the primary objective of financial reporting: Financial reporting aims to provide useful information to external users such as investors, creditors, and other stakeholders to make informed decisions.
Eliminate incorrect options: Review each option and identify which ones do not align with the purpose of financial reporting. For example, focusing solely on internal management needs or guaranteeing profitability are not objectives of financial reporting.
Focus on decision-making: Recognize that the correct objective emphasizes providing information that aids in rational investment, credit, and similar decisions.
Consider the stakeholders: Financial reporting is designed to serve external users, including present and potential investors, creditors, and other users, rather than focusing on minimizing taxes or internal management needs.
Select the correct answer: Based on the analysis, choose the option that aligns with the purpose of financial reporting, which is to provide useful information for decision-making by external users.