BU227 Chapter 2: Chapter 2 Investing & Financing Decisions, and Statement of FP
Document Summary
The key accounting concepts are part of a theoretical framework that prescribes the nature, function, and limitations of both financial accounting and financial statements. Primary objective of external financial reporting: to provide useful economic information about a business to help external parties make financial decisions. Decision makers: the users of accounting information; investors, creditors, experts. A company"s audited financial statements help users to understand how well the company has implemented its strategy in the past, and to evaluate future growth potential. Users are most interested in information to assist in projecting the future cash flows of a business: creditors must assess an entity"s ability to pay interest over time and repay the principal. Investors want to assess the entity"s ability to pay dividends in the future & evaluate how successful the company may be so they can sell their shares to make a profit.
