Explanation

Financial statements are necessary for:

• Evaluating the financial performance of a company: Financial statements provide stakeholders with information about a company's financial position, performance, and cash flows, enabling them to assess its financial health and make informed decisions.
• Making investment decisions: Financial statements help investors and analysts evaluate a company's financial prospects, risk profile, and potential for growth, enabling them to make informed investment decisions.
• Complying with laws and regulations: Publicly traded companies are required by law to prepare and disclose financial statements, such as the balance sheet, income statement, and cash flow statement, to ensure transparency and accountability.