Management accounting: Section (A): External financial reporting decisions: Part.1: Financial statement

Question 1

Who are the indirect users of the financial statement?

Answer 1

1- Financial advisors & analysts.
2- Stock markets OR exchange.
3- Regulatory authorities.

Question 2

Who are the direct users of the financial statement?

Answer 2

1- Investors OR potential investors.
2- Suppliers & creditors.
3- Employees.
4- Management.

Question 3

Define: External users:

Answer 3

They use financial statements to determine whether doing business with the firm will be beneficial or not.

Question 4

Define: Internal users:

Answer 4

Those who use financial statements to make decisions affecting the operations of the business.

Question 5

Define: Investors:

Answer 5

An individual that puts money into an entity for a financial return.

Question 6

Define: Stock exchange:

Answer 6

A market place where you buy stocks, bonds, and other securities.

Question 7

Define: Supplier:

Answer 7

A person, company, or organization that sells or supplies something such as goods or equipment to customers.

Question 8

Define: Financial advisor:

Answer 8

A professional who provides expertise for clients’ decisions around money matter, personal finances, and investment.

Question 9

Define: Regulatory agency:

Answer 9

Independent governmental body established by legislative act in order to set standards in a specific field of activity, or operations, in the private sector of the economy & then enforce those standards.

Question 10

Define: Management:

Answer 10

A distinct process consisting of planning, organizing, actuating, and controlling.

Question 11

Define: Employee:

Answer 11

One employed by another usually for wages or salary & in a position below the executive level.

Question 12

Why does an investor need financial statement’s information?

Answer 12

They need information to decide whether to increase, decrease, or obtain an investment in a firm.

Question 13

Why does an employee need financial statement’s information?

Answer 13

To negotiate wages and fringe benefits based on the increased productivity and the value they provide to a profitable firm.

Question 14

Why does a creditor need financial statement’s information?

Answer 14

To determine whether to extend credit and under what terms.

Question 15

Why does a Financial advisor need financial statement’s information?

Answer 15

To help investors evaluate particular investments.

Question 16

Why does a stock exchange need financial statement’s information?

Answer 16

To evaluate whether to accept a firm’s stock for listing or whether to suspend the stock’s trading.

Question 17

Why does a manager need financial statement’s information?

Answer 17

To assess financial strengths & deficiencies. To evaluate performance results & post decisions. To plan for future financial goals & steps towards accomplishing them.