Financial statements are projections of an enterprise’s progress and they entail drafting of balance sheets and profit and loss declarations. They are used to create an impression of an organization to the outside world. These statements are very important because they are referred to during acquisitions and mergers. When managers want to get a glimpse of the condition of the organization, they refer to these statements because by doing so they can get clear information regarding the trend of the organization. The statements are indicators of when things are not going well most probably due to losses incurred or reduced sales. When an organization is making profits, it is these statements that still imply so. But for the statements to be valid they have to be verified by an independent auditor to determine whether what is on paper corresponds with what is on the ground. The statements are used by managers when making decisions because they help them in budgeting by checking the money that is available and expected proceeds. According to Wang (2010), financial statements are also reliable tools for the government because they are used to tell the amount of taxes that an organization should pay. Without these statements, it would be difficult for governments to dictate the taxes payable by any given organization because taxes are allocated according to the proceeds of an organization. This is why governments are very strict about these statements especially to publicly owned institutions. In addition, financial statements are very useful because they are analyzed by financial institutions before granting a loan to any organization since they are the ones that tell whether an organization will be able to repay the debt in a good time. Without these statements, it would be difficult for organizations to convince creditors to lend them money by word of mouth. When budgets are being drafted, financial statements help in planning for expenses because they portray the money that is at hand hence when decisions are being made they are referenced to make sure that the decision made by managers will be successful. Managers should recommend business alternatives based on financial analysis because the statements are the ones that report on the losses and profits made hence making decisions without referring to financial statements can be misleading. Financial statements enable the organization to make decisions based on what it has because the statements enable the managers to identify the strengths and weaknesses of an organization. Correla et al. (2007) argue that when an organization understands its strengths it will be able to make good use of them to gain more proceeds than when the strengths are not known. The weaknesses include the mistakes that were made and financial analysis helps to identify them and thus the organization will identify the strategies that need to be employed to ensure that the same mistakes are not repeated in the future. When weaknesses and strengths are not known decisions may not be effective. For instance, by referring to financial statements an organization can determine why there were reduced sales and come up with ideas that are derived and guided by the statement