Main Users of financial Reports and Their Conflicts
Identify the main users of financial reports, explaining to what use(s) they may put such reports. To what extent is there a conflict between different uses? How far are these conflicts resolved in a single set of annual accounts?
The financial reports are profit and loss account, balance sheet and cash flow statement.
There are many users /parties interested in the accounts of a company /organization. These include the following:
The owners / shareholders
The directors / managers
The employees
The creditors, i.e. suppliers of goods on credit
The tax authorities
Lenders, such as banks or other financial institutions
Government
The users want the accounts for a variety of purposes, for example:
The owners/shareholders are mainly concerned of the profitability of the business and they therefore use them to see if they are getting a satisfactory return on their investment, and also to assess the financial health of their company/business. They may also use financial statements to assess the performance of the managers and decide the pay of managers who are employed to run the business for owners, which is part of the stewardship role of the accounting.
The directors/managers are the ones to conduct the day-to-day operations and decision-making of the business and they are, arguably, the most important users of the business because they require much more information in great detail on a more frequent basis than any other users. They normally use them for making both internal and external comparisons to evaluate the performance of business. They may compare their own financial analysis of their company with industry figures (competitors) in order to ascertain their company's strengths and weaknesses. Management are also concerned with ensuring that the money invested in the company / organization is generating an adequate return and that the company / organization is able to pay its debts and remain solvent.
The creditors want to know if they are likely to
The financial reports are profit and loss account, balance sheet and cash flow statement.
There are many users /parties interested in the accounts of a company /organization. These include the following:
The owners / shareholders
The directors / managers
The employees
The creditors, i.e. suppliers of goods on credit
The tax authorities
Lenders, such as banks or other financial institutions
Government
The users want the accounts for a variety of purposes, for example:
The owners/shareholders are mainly concerned of the profitability of the business and they therefore use them to see if they are getting a satisfactory return on their investment, and also to assess the financial health of their company/business. They may also use financial statements to assess the performance of the managers and decide the pay of managers who are employed to run the business for owners, which is part of the stewardship role of the accounting.
The directors/managers are the ones to conduct the day-to-day operations and decision-making of the business and they are, arguably, the most important users of the business because they require much more information in great detail on a more frequent basis than any other users. They normally use them for making both internal and external comparisons to evaluate the performance of business. They may compare their own financial analysis of their company with industry figures (competitors) in order to ascertain their company's strengths and weaknesses. Management are also concerned with ensuring that the money invested in the company / organization is generating an adequate return and that the company / organization is able to pay its debts and remain solvent.
The creditors want to know if they are likely to