Which of the following is an example of financial reporting to external audiences?

Financial reporting to external audiences involves the practice of presenting financial information to individuals or entities outside of the organization, such as shareholders, investors, creditors, and regulatory agencies. This type of reporting is crucial for maintaining transparency, facilitating informed decision-making, and establishing trust with external stakeholders.

The annual reports to shareholders serve as a comprehensive summary of a company's financial performance and activities over the past year. These reports typically include important financial statements like the income statement, balance sheet, and cash flow statement, along with management's analysis and insights into the company's strategy, risks, and future outlook. By providing this detailed information, the organization can affect how shareholders and potential investors perceive its financial health and operational efficacy.

In contrast, employee payroll statements, internal budget forecasts, and day-to-day expense tracking do not fall under the umbrella of external financial reporting. Payroll statements are intended for the individual employees and provide personal compensation details. Internal budget forecasts are utilized by management for planning purposes and do not convey information to outside parties. Similarly, day-to-day expense tracking is a routine internal process that assists in managing a company's operations but does not communicate financial overall health or strategies to external stakeholders.