Unit 2 Problems 3-2 Who are some of the basic users of...

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Unit 2 Problems 3-2: Who are some of the basic users of financial statements, and how do they use them? Creditors, shareholders, potential investors, management, and employees are considered some of the basic users of financial statements. The information that is contained within an annual report can potentially be used in order to forecast future earnings and dividends, and other investing decisions for the company. For example, creditors would use the information from a financial statement in order to know the financial position of the company. Managers and internal staff would utilize financial statements in order to make management decisions and to understand the performance of the company. 3-3: If a “typical” firm reports $20 million of retained earnings on its balance sheet, could its directors declare a $20 million cash dividend without having any qualms about what they were doing? Explain your answer. Yes, directors may be able to distribute entire profits as dividends however. this is an unlikely possibility. Directors would probably be unable to declare a $20 million cash dividend due to the
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