Distinguish financial plans and statements

Subject : Business

Question: Distinguish financial plans and statements.

A. Financial plans help you to track the progress you are making in building up your assets and reducing your debt; financial statements report if the progress is enough to reach your financial goals.

B. Financial plans provide you with the tools of up-to-date evaluations of your financial well-being; financial statements allow you to control spending.

C. Financial plans measure financial performance over time; financial statements help you to have the funds needed to carry out your financial plans.

D. Financial plans report where you are going; financial statements report if you are there yet as of a given point in time.

Expert Verified Solution:

The correct answer is:

D. Financial plans report where you are going; financial statements report if you are there yet as of a given point in time.

Explanation:

Financial Plans: These are strategic tools that outline your financial goals and the steps needed to achieve them. They are forward-looking and focus on where you want to go financially, including setting goals, budgeting, and planning for investments and savings.

Financial Statements: These are historical records that provide a snapshot of your financial situation at a specific point in time. They include documents such as balance sheets, income statements, and cash flow statements. Financial statements help you assess whether you are on track to meet your financial goals by showing your current financial status.

In contrast:

A. Financial plans help track progress and statements report progress towards goals: While this is somewhat accurate, the distinction between tracking (plans) and reporting (statements) is not as clearly defined as in option D.

B. Financial plans provide evaluations, statements control spending: This is not accurate as financial plans are more about future goals and strategies, whereas financial statements provide historical data.

C. Financial plans measure performance, statements provide funds: This is incorrect as financial plans do not measure performance; they set goals. Financial statements do not provide funds but report on financial status.