Who are the main users of published financial accounts?
- Lenders/ Trade Creditors or Suppliers
- General Public
For what purposes do these groups of people make use of financial accounts, and what type of informaton do you think they are likely to require? Is this information necessarily financial?
- The Government uses the financial acocunts/ financial statements to determine how much tax should be paid by the company.
- Investors will use the income statement and statement of financial position to determine the profitability of a business and whether it would be wise to invest the company.
- Shareholders can use published financial accounts to decide on whether to sell their shares in the company or retain it. These sort of decisions involve a risk return decision process whereby we consider whether the risk is worth it in relation to how much return we stand to gain.
- Managers have to consider issues such as whether the company has enough cash and whether target was met for the year and possibly forecast what the profitability of the business will be for the next period.
- Published financial accounts are usually financial in nature often ignoring non-financial information as only monetary information is included. However, sometimes information is not necessarily financial in nature is presented in monetary terms. For example, on Tesco's Group balance…