Please answer the following:

1. Define financial report

Financial reporting is the financial results of a firm. That is a formal record of the activities of weekly or monthly
projects of a firm. Is the process of providing useful economic information to external users for decision-making.

2. Identify the three (3) basic types of financial reports and define each

1) balance sheet - statement a company's assets, liabilities, and shareholders' equity.

2) income statement - shows the profit or loss made during the year by taking into consideration the revenues
generated during the year.

3) cash flow statement - statement are cash from operating activities, cash from investing activities, and cash from
financing activities. It also includes all cash outflows that pay for business activities and investments during a given
period.

3. Describe the users of financial reports

1. Management - They have to make decisions such as whether to add debt or how to maintain cash flow.

2. Business competitors - To know the financial health of the other company. Further, they could decide to change
their strategy looking at the statements.

3. Customers - They are procuring goods or services would like to work with a company that is financially stable.

4. Employees - They would like to know if the company is doing as their bonus and increments depend on the
financial performance of the company.

5. Government agencies - The sales tax department, would like to go through the company’s financial report to keep
a check if the company paid appropriate taxes.

6. Investors - They would like to make the decision based on the financial report, whether they need to keep invested
or move out of the company based on its performance.

7. Lenders - To check the ability of the company to pay the debt. Through the financial report of the company and see
if they would provide a loan.

8. Credit rating agencies - Issuing company has to provide all information to the credit rating agency to get a rating of
the securities it is issuing to raise funds.

9. Suppliers - Would like to deal with companies that have good financial health and users of financial report to
provide decision-making.

4. Explain the limitations of financial reports.

Information often comes from approximate measures based on assumed assumptions. Heavy reliance on historical
costs, indifference to inflation, prone to frauds, easily manipulated. Therefore those users need to consider relevant
information from other sources.