Financial reports provide information that can reduce investors' uncertainty about the company's opportunities and risks, thereby raising the company's cost of capital.a)trueb)false

b) false

Financial reports are designed to provide detailed information about a company's financial health, performance, and business activities. This information helps investors, creditors, and other stakeholders assess the company's profitability, liquidity, solvency, and overall financial stability. By reducing the information asymmetry between the company managers and investors, good quality financial reporting actually reduces the perception of risk associated with investing in that company.

When investors have less uncertainty about a company's financial situation and prospects, they can make more informed judgments about the future performance of that company. As a result, if the financial reports indicate that the company is performing well and has good prospects, this can actually lower the company's cost of capital. Investors require less return for less risk, which means the company can obtain financing at a lower cost. Therefore, it is not true that financial reports raise the company's cost of capital; they typically have the opposite effect when the reports are positive.