Users of Financial Information

Users of Financial Information

• Investors

  • Purpose: Seek profitability from their investment.

  • Returns: Look for dividends and capital repayment.

  • Risk Assessment: Concerned about the potential for company failure and whether they will receive returns in the future.

  • Investment Decision: May decide to withdraw their investment based on financial health.

• Employees

  • Interests: Want to know the company’s financial health.

  • Pay Raises: Interested in potential raises or bonuses tied to company profits.

  • Job Security: Most importantly, they are concerned about their employment stability.

• Lenders (Banks, Creditors)

  • Concerns: Need assurance the business can repay loans on time.

  • Creditworthiness: Assessment of financial statements to evaluate risk of default.

• Suppliers

  • Interest: Need to know if the business will honor its payment commitments.

  • Credit Terms: Might alter credit terms if they perceive financial distress (e.g., reducing credit periods).

• Customers

  • Concern: Want to ensure they can continue purchasing products/services.

  • Business Viability: Their decision to buy may depend on the perceived profitability of the supplier.

• Government and Their Agencies

  • Interests: Regulate businesses for compliance and taxation purposes.

  • Financial Monitoring: Use financial statements to assess compliance with laws and contribution to the economy (taxes).

• General Public

  • Interests: Stakeholders in the business’s effects on the community and economy.

  • Transparency: Want to understand the business's overall impact and sustainability.

Accounting Records

• Importance: Essential for tracking financial health.

• Bookkeeping Process: Essential to convert accounting records into financial statements.