Question

Discuss five users of financial statements

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Answer 1

Financial Statement prepared by the companies are used by the different different categories of individual, corporate in the sense relevant to them. The most common users are to the financial statement are listed below:

a. Management of the company

b. Investors

c. Government

d. Rating agencies

e. suppliers

MANAGEMENT OF THE COMPANY - The management of the company is the first user of the financial statement. Although they are the once who prepare the financial statement the board and management as a whole need to refer to them while considering the progress and growth of the company.

The management of the company looks at the financial statement from the prospective of profitability, cash flow, extension of business, assets and liability etc.

INVESTORS - Investors are the real owner of the company, they would like to understand keep update with the financial position of the company in which they are invested or willing to invest.

GOVERNMENT - Government agencies like direct taxation authorities, indirect tax authorities, protection of employee's and workers agencies, and other agencies to receiving appropriate taxes and to enforce law and regulation on the company with the help of the financial statement of the company.

RATING AGENCIES - The credit rating agencies review the financial performance / capacity performance / production performance / extend of business, with the help of financial statement of the company to give credit rating to the debt/equity of the company.

These credit ratings are very useful for the company to invest in the company the investors.

SUPPLIERS - Supplier like the customer would like to deal with the company that have good financial health. Thus they are the users of the financials statement and make decision to provide credit to the company.