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Identify The Main Users Of Financial Reports

1102 words - 5 pages

A financial statement (or financial report) 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. They typically include basic financial statements.
• Income Statement: reports the results of operations for a specific period of time.
• Retained Earnings Statement: reports the changes in retained earnings for a specific period of time
• Balance Sheet: reports the company's financial position at a specific date.
• Statement of Cash Flows: reports the case receipts and payments for a specific period of time.

The objective of financial statements is to ...view middle of the document...

• Employees also need these reports in making collective bargaining agreements (CBA) with the management, in the case of labor unions or for individuals in discussing their compensation, promotion and rankings.
External Users
• Investors make use of financial statements to assess the viability of investing in a business. Financial analyses are often used by investors and are prepared by professionals (financial analysts), thus providing them with the basis for making investment decisions.
• Financial institutions (banks and other lending companies) use them to decide whether to grant a company with fresh working capital or extend debt securities (such as a long-term bank loanor debentures) to finance expansion and other significant expenditures.
• Government uses The financial statements of different companies are also used by the government to analyze whether the tax paid by them is accurate and is in line with their financial strength.
• Vendors use The vendors who extend credit to a business require financial statements to assess the creditworthiness of the business.

" Almost everyone at some point will use or come in contact with some form of financial report or financial statement"
Looking on the business end, many people use financial reports to determine the financial position of a company, whether a small business or a large corporation, financial reports are very important to the life of a business. Looking at the financial reports of a business can help determine how good or bad a business is doing. Investors, whether banks, private, or even stockholders, can determine if a business is worth the risk of investing into.
Small business owners, managers and even CEO's of large Corporations use financial statements to determine where their business stands and how to proceed in the years to come. Can they afford to hire new employees or do they need to cut back. Moreover, it helps to decide if the business can expand and take strategic decisions based on the cost. They may also use financial statements for Tax Purposes.
We have seen above that each user group looks at a business from a different perspective and has its own particular interests. This means that there is always the risk that the interests of one group will conflict with those of another group. Conflicts between user groups is most likely to occur over the way in which the wealth of the business is generated and/or...

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