Users of Financial Information. The following people are likely to be interested in financial information about a large company with listed shares.
Users of Financial Information
Managers/Directors appointed by the company’s owners to supervise the day-to-day activities of the company. They need information about the company’s present and future handle situation. This enables them to manage the business efficiently (exercising the stewardship function) and to make effective decisions.
Shareholders. ie the company’s owners. want to assess management performance. They want to know how profitable the company’s operations are and how much profit they can afford to withdraw from the business for their own use.
Trade contacts include suppliers who provide goods on credit and customers who purchase goods or services. Suppliers want to know about the company‘s ability to pay its debts; customers need to know that my company is a secure source of supply.
Finance providers include banks that allow the company to operate an overdraft or provide longer-term loan finance secured on the company‘s assets A bank wants to ensure that the company It able to keep up loan payments.
The Internal Revenue Service
The Internal Revenue Service wants to know about business profits in order to assess the company tax liabilities
Employee: have an interest m the company’s financial situation. because their careers and remuneration depend on It.
Financial analysts and advisers
Financial analysts and advisers need information for their client: or audience For example- stockbrokers need the information to advise inventors; credit agencies want the information to advise potential suppliers of goods: to me company. and journalists need information for their reading pubic.
Government agencies are interested in the efficient allocation of resources and therefore in the activities of enterprises. They also require information in order to provide a basis for national statistics.
The public. Business entities affect members of the public in a variety of ways. For example. they may make a substantial contribution to a local economy by providing employment and using local suppliers. Another important factor is the effect of an entity on the natural environment. for example, as regards pollution.
In a Nutshell
Accounting Information is summarized in financial statements to satisfy the Information needs of these different groups; Not all will be equally satisfied.
Managers of a business need the most Information, to help them make planning and control decisions. They have greater access to business information. because they are able to review internally produced statements. Managers can obtain extra information through the cost and management accounting system.