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Users of the Financial StatementsThe main users (stakeholders) of financial statements are commonly grouped as follows:
Management and competitors would also use the financial statements of a business to make economic decisions. Management, however, would predominantly use monthly management accounts as their main source of financial information. It is also unlikely that a business would prepare financial statements for the purpose of aiding competitors!
Article shared by : The following are the groups who like to make use of financial statements:- 1. Owners 2. Management 3. Creditors 4. Employees 5. Investors 6. Government 7. Consumers 8. Stock Exchange. User # 1. Owners: The owners provide funds or capital for the organisation. They possess curiosity in knowing whether the business is being conducted on sound lines or not and whether the capital is being employed properly or not. Owners, being businessmen, always keep an eye on the returns from the investment. Comparing the accounts of various years helps in getting good pieces of information. User # 2. Management: The management of the business is greatly interested in knowing the position of the firm. The accounts are the basis, on which the management can study the merits and demerits of the business activity. Thus, the management is interested in financial statements to find whether the business carried on is profitable or not. The financial statements are the “eyes and ears of management and facilitate in drawing future course of action, further expansion etc.” User # 3. Creditors: Creditors are the persons who supply goods on credit, or bankers or lenders of money. It is usual that these groups are interested to know the financial soundness before granting credit. The progress and prosperity of the firm, to which credits are extended, are largely watched by creditors from the point of view of security and further credit. Profit and Loss Account and Balance Sheet are nerve centres to know the soundness of the firm. User # 4. Employees: Payment of bonus depends upon the size of profit earned by the firm. The more important point is that the workers expect regular income for the bread. The demand for wage rise, bonus, better working conditions etc., depend upon the profitability of the firm and in turn depend upon financial position. For these reasons, this group is interested in financial statements. User # 5. Investors: The prospective investors, who want to invest their money in a firm, of course wish to see the progress and prosperity of the firm, before investing their money, by going through the financial statement of the firm. This is to safeguard the investment. For this purpose, this group is eager to go through the accounting statements which enable them to know the safety of investment. User # 6. Government: Government keeps a close watch on the firm which yield good amount of profits. The state and central governments are interested in the financial statements to know the earnings for the purpose of taxation. At present most of the business concerns are organised and operated in the form of Joint Stock Companies. One of the main features of company form of organisation is that there is distinction between providers of capital and those entrusted with the actual operation and the management of the business. Just to safeguard the interest of former class, the government is interested in the financial statements. User # 7. Consumers: These groups are interested in getting the goods at reduced price. Therefore, they wish to know the establishment of proper accounting control, which in turn will reduce the cost of production, in turn less price to be paid by the consumers. Researchers are also interested for interpretation. User # 8. Stock Exchange: The financial statements are the blueprints of financial affairs. These statements facilitate the stock exchange to protect the investors’ interests or to watch as a watch-dog of corporate investors. Professional societies like Chambers of Commerce, Indian Accounting Associations, Employers’ Association, Banks, Financial institutions etc. are deeply interested in such statements of business concerns. Who are the users of financial statements and what are their information needs?The financial statements are used by investors, market analysts, and creditors to evaluate a company's financial health and earnings potential. The three major financial statement reports are the balance sheet, income statement, and statement of cash flows.
Who are the main users of financial statements?The most common users of the financial statements are listed below:. Management of the Company.. Investors.. Customers.. Competitors.. Government and Government Agencies.. Employees.. Investment Analysts.. Lenders.. Who is interested in financial statements and why?Financial statements are important to investors because they can provide enormous information about a company's revenue, expenses, profitability, debt load, and the ability to meet its short-term and long-term financial obligations. There are three major financial statements.
Which user will be interested in the financial statement information for the purpose that will assure them that amount owed to them will be paid when due?Internal Users of Financial Statements
Managers are the primary users of financial statements because they need the information to do their jobs. They have to make decisions such as whether to add debt or how to maintain cash flow. Making those calls requires detailed knowledge about company finances.
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