Why are Financial Statements so Important?
Transparency of Capital Markets: Our capitalistic society is based on the trust and transparency of available financial information, so key decision makers can make informed decisions. In many emerging markets, standards are more lax and well-versed decisions are more difficult to make. Ultimately, if you believe in free markets, money migrates to where it is treated best. Reliable and transparent financial systems build investor confidence and make our system work. When companies like AIG and Enron have complex derivatives and opaque off balance sheet structures that are not clearly disclosed, then investors and key decision makers are at a disadvantage. The companies generally suffer as well, since investors afford lower valuations for complex organizations. Investment Bankers / Sell Side Research: Investment bankers rely heavily on financial statements when determining the suitability of corporate marriage. A company cannot be bought or sold without determining an agreed-upon valuat
