Uses of financial statements

Users of Financial Statements The objective of accounting is to provide information to users for decision-making.

Uses of financial statements

Users of Financial Statements The objective of accounting is to provide information to users for decision-making. But, who exactly are these "users of financial statements"? What information do they need? The users of accounting information include: Owners and investors Stockholders of corporations need financial information to help them make decisions on what to do with their investments shares of stocki.

In the same way, small business owners need financial information to determine if the business is profitable and whether to continue, improve or drop it. Management In small businesses, management may include the owners.

In huge organizations, however, management is usually made up of hired professionals who are entrusted with the responsibility of operating the business or a part of the business.

They act as agents of the owners. The managers, whether owners or hired, regularly face economic decisions — How much supplies will we purchase?

There are many users of the financial statements produced by an organization. The following list identifies the more common users of financial statements, and the reasons why they need this information: Company management. Businesses commonly have a variety of stakeholders, from owners to employees to creditors, all of whom have an interest in the company being in sound shape. Your company's financial statements. The general purpose of the financial statements is to provide information about the results of operations, financial position, and cash flows of an organization. This information is used by the readers of financial statements to make decisions regarding the allocation of resources.

Do we have enough cash? How much did we make last year? Did we meet our targets? All those, and many other questions and business decisions, require analysis of accounting information. Taxes are computed based on the results of operations and other tax bases.

In general, the state would like to know how much the taxpayer makes to determine the tax due thereon. They are after the ability of the company to pay salaries and provide employee benefits. They may also be interested in its financial position and performance to assess company expansion possibilities and career development opportunities.

This need is also heightened in cases where the customers depend upon the entity. For example, a distributor resellerthe customer in this case, is dependent upon the manufacturing company from which it purchases the items it resells.

General Public Anyone outside the company such as researchers, students, analysts and others are interested in the financial statements of a company for some valid reason.

Internal and External Users The users may be classified into internal and external users. External users, on the other hand, are not involved in the operations of the company but hold some financial interest. The external users may be classified further into users with direct financial interest — owners, investors, creditors; and users with indirect financial interest — government, employees, customers and the others.

Assume we are looking into two companies — Company A and Company B. In which company would you invest — Company A or B? Then you get the point. Online resource for all things accounting.Such statements are used for discussing matters of promotion, rankings and salary hike.

Uses of financial statements

External Users: The External users comprise of: Institutional Investors: The external users of financial statements are basically the investors who use the financial statements to assess the financial strength of a company.

This would help them to make logical investment decisions. The objective of accounting is to provide information to users for decision-making. But, who exactly are these "users of financial statements"?

What information do they need? The users of accounting information include: the owners and investors, management, suppliers, lenders, employees, customers, the government, and the general public.

What are 'Footnotes To The Financial Statements' Footnotes to the financial statements refer to additional information that help explain how a company arrived at its figures and to explain any. The users of financial statements may be inside or outside the business. The users of financial statements use financial statements for a large variety of business purposes and their ability to understand and analyze financial statements helps them to succeed in the business world.

The general purpose of the financial statements is to provide information about the results of operations, financial position, and cash flows of an organization. This information is used by the readers of financial statements to make decisions regarding the allocation of resources.

There are many users of the financial statements produced by an organization. The following list identifies the more common users of financial statements, and the reasons why they need this information: Company management.

Users of Financial Statements - AccountingVerse