Intermediate Accounting (16th Edition)

Published by Wiley
ISBN 10: 1118743202
ISBN 13: 978-1-11874-320-1

Chapter 1 - Financial Accounting and Accounting Standards - Review and Practice - Questions - Page 22: 5


Generally, investors are usually interested in financial reporting due to the fact that it provides information that is useful when it comes to decision making and what is commonly refereed to as the decision-usefulness approach.

Work Step by Step

Further, the approach of decision-usefulness is of great importance since it helps investors to assess a company's ability to generate net cash-inflows as well as the management's capability to protect as well enhance the capital provider's investment. To this end, its apparent that financial reporting helps capital providers to assess the amounts, timing and uncertainties of prospective cash inflows from dividends, interest, proceeds from sale , redemption, or even maturity of either securities or loans. In a nutshell, this approach brings a deeper understanding concerning the financial performance and position of an organization.
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