Answer to Question #196538 in Accounting for joshua muendo

Question

1.Explain why non-financial information is likely to give more reliable indication of the likely future prosperity of the company than the financial information

Answer 1

Solution:

Non-financial information is a form of transparency reporting where organizations formally disclose certain information not associated with their finances, including information on human rights. Examples include environmental impact, supplier relationship, workplace diversity, and social responsibility.

Non-financial information is very important to any organization as it helps existing and potential stakeholders make better business decisions by providing a more holistic overview of business performance. It is a closer link to long-term organizational strategies. By supplementing accounting measures with non-financial information about strategic performance and implementation of strategic plans, organizations can communicate objectives and provide incentives for managers to address long-term strategy. Non-financial information can also provide indirect, quantitative indicators of a company’s intangible assets. They can also be better indicators of future financial performance since they can capture long-term benefits from decisions made now.