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Finance and Accounting - Essay Example
Finance & Accounting
Pages 8 (2008 words)
Finance and Accounting Customer Inserts His/Her Name Customer Inserts Grade Course Customer Inserts 14 February 2012 Finance and Accounting Qualitative characteristics influence the financial information’s effecti. The research focuses on the qualitative characteristics of financial report preparation…
Materiality is one of the qualitative characteristics. Prudence is another qualitative characteristic. Relevance is an important qualitative characteristic. Reliability is a necessary qualitative characteristicii. The users of the financial information rely on the qualitative characteristics of the financial statements for their decision making activitiesiii. The creditors use the financial statements as one of the tools for deciding whether to grant loans or credit terms to the credit applicant. Financial statement indicating the company generated a profit trend for the past two years will persuade the creditors to grant the loans or credit applications. The net profit portion of the financial statements indicates the company will be able to pay its maturing loan and credit obligations on time. On the other hand, the creditors will be discouraged to approve the credit or loan application of a company having a net loss financial picture. The net loss financial picture indicates a strong probability that the company may close shop in the next few years. The credit or loan applicant may not be able to comply with its duty to pay its loans or credits when the maturity dates crop up. ...
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