Description
requirement in the pdf. DO NOT PLAGIARISM. my prof is very very strict. for all references you must cite clearly!
Unformatted Attachment Preview
Purchase answer to see full attachment
Explanation & Answer
View attached explanation and answer. Let me know if you have any questions.
1
Corporate Financial Reporting and Disclosure for Economic Decisions
Name
Institution
Course
Professor
Date
2
Corporate Financial Reporting and disclosure for economic decisions
Corporate financial reporting refers to a system of preparing, reporting, and
publishing financial reports. The corporate financial reports include the income statement,
balance sheet, cash flow statement, retained earnings statement, and financial policies
explanation (Young et al., 2018). The different reports each serve a different purpose when
reporting is done. The income statement is also known as the profit and loss account since it
indicates whether a corporation is making losses or profits. The balance sheet indicates the
financial position of a firm at a particular time. This report contains information on the
liabilities and assets that a company possesses. The cash flow statement indicates the net cash
flow of a company in investing, operating, and financial activities (Unerman et al., 2018). In
addition to the reports, corporations provide financial notes comprehensively explaining their
economic policies. For instance, a company may explain its depreciation, inventory, and
dividend policy. Laws and International Financial Reporting Standards (IFRS) require
companies to publish their financial statements in a particular way and period.
Disclosure is whereby a business is required to make all the relevant information
available to the public promptly. In this case, “relevant information” includes all the
information, which can impact a stakeholder’s decision (Ngu & Amran, 2018). That may
include, among others, all the appropriate figures, facts, procedures, and dates. All this
information should be provided regardless of whether it is advantageous or disadvantageous
to the business. The aim is so that a stakeholder such as an investor can make an informed
decision based on all the relevant facts. That information should also be provided before an
investor makes a decision. It should not come after a decision is made since that would not be
timely. The various major financial statement elements that a corporation should disclose
3
include its income, equity, liability, assets, and expenses. Corporate financial reporting and
disclosure play a fundamental role in a range of economic decisions.
Importance of Corporate Financial Reporting to external stakeholders
The financial reports assist external stakeholders such as investors and creditors in
making informed decisions. Companies are required to provide relevant and accurate
information on time. That information can be used by investors when they want to make
economic decisions. The financial statements provide fundamental information about a
company’s financial position, including its revenues, expenses, profits, losses, and debt load.
The statements give investors a baseline for doing their analysis before making decisions,
including the valuation of a corporation (Roychowdhury et al., 2019). Investors can
understand the performance of a company and its cash flows by looking at the financial
statements. The information allows the investors to set price targets and determine whether
the price of a stock is fair, undervalued, or overvalued. Investors assess various financial
statements when making decisions, including the income statement, balance sheet, and cash
flow statement. With these statements, they will understand whether a company is making
profits or losses and is in a better financial position (Beyer et al., 2010). Further, they will
understand how efficiently a company is managing its cash and cash equivalents and meeting
its obligations. Th...