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Identify the five (5) users of financial statement and how could they use the ratios to make decisio

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b) Identify the five (5) users of financial statement and how could they use the ratios to
make decisions.
Financial statements are used by many people out of the industry. It is very beneficial
to everyone. A financial statement is a formal record of the financial activities of a business,
person or other entity. Relevant financial information is presented in a structured manner and
in a form easy to understand. The users of the financial statement include owners and investors,
the management, creditors, tax authorities and the general public.
The owners and investors, are also known as the stockholders of corporations. They
need the financial information’s to help them make decisions on what to do with their
investments. Prospective investors need information to assess the companies’ potential for
success and profitability. The shareholders take the financial statement to assess the risk of
joining venture with the company. In the same way, small business owners need financial
information to determine if the business is profitable and whether to continue or to improve or
to drop it. Usually an institution that lends products or money will examine the financial status
of the company before taking any decision because it may put their institution on risk.
In many business, the management may include the people running the business and
also the owner. In very big organizations, the management of the industry is made of
professionals who hold the responsibility to run the business who are also a part of the industry
or the company. They are officially called the agent. Practically, the managers may be the
owners themselves or being hired, who are very trustworthy and is being trusted to whole the
whole company in the absence of the owner to make regular economic decisions. It is the
manager’s duty to see if the cash flow is smooth, or there enough cash, the profit made every
month, and are the targets of the month being fulfilled properly. Hence, the management uses
the financial reports for analysing the organizations performance and position and taking
appropriate measures to improve the company results.
The creditors are knows as an external user or also the secondary user. They are also
knows as the lenders or the suppliers. Lenders usually include the bank or other financial
institutions that are interested in the companies’ ability to pay up their liability on time. Just
like the lenders, the creditors and suppliers are also interested to know the ability of the
company to pay their liabilities on due. The creditors determine the worth of the company or
the industry based on the solvency or the liquidation state of the company or industry.
The terms to pay back are always set by the creditors based on the past history of the company

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b) Identify the five (5) users of financial statement and how could they use the ratios to make decisions. Financial statements are used by many people out of the industry. It is very beneficial to everyone. A financial statement is a formal record of the financial activities of a business, person or other entity. Relevant financial information is presented in a structured manner and in a form easy to understand. The users of the financial statement include owners and investors, the management, creditors, tax authorities and the general public. The owners and investors, are also known as th ...
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