The User of Financial Statement.

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In Buisness provides financial statement to know about buisness cycle. Each group uses accounting information differently, and requires the information to be presented differently.


Generally, There are two part who use Financial Statement. It's from External and Internal part.


From Internal. It means Internal users refer to People who use accounting information in making decisions related to the company's operations. 

For instance:



Owner (I)

small or big business owners need financial information to determine if the business is profitable and whether to continue, improve or drop it.


Management of the Company (I)

The management of the company is the first and foremost user of the financial statements. Although they are the ones who prepare the financial statements, the board and the management 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 perspective of liquidity, profitability, cash flows, assets and liabilities, cash balances, fund requirements, debt to be paid, project financing, and various other days to day operational activity. Simply put, the management of the company needs financial statements to make decisions about the business.


Employees (I)

Employees can measure the ability of company to pay their salaries, to know the chance for taking higher position or vice versa. At some point, financial statement can earn awe so because of that, the employees are more having motivation to work .


Investors (E)

Investors need financial information to help them make decisions on what to do with their investments (shares of stock), i.e. hold, sell, or buy more.

Prospective investors need information to assess the company's potential for success and profitability. 


Customers (E)

Customers need to view the financial statements of the company from which they are procuring goods or services. Big clients would like to have a long-term partnership or contract with the company; thus, they would like to work with a company that is financially stable. Further, a financially strong company can provide its customers with credit sales and can deliver products and services at a discount than the market.


Competitors (E)

Entities competing against a business will attempt to gain access to its financial statements, in order to evaluate its financial condition. The knowledge they gain could alter their competitive strategies.


Government (E)

Governing bodies of the state, especially the tax authorities, are interested in an entity's financial information for taxation and regulatory purposes. Taxes are computed based on the results of operations and other tax bases. In general, the state would like to know how much the taxpayer makes to determine the tax due thereon


Lenders (E)

Lenders of funds such as banks and other financial institutions are interested in the company’s ability to pay liabilities upon maturity (solvency). If they know about financial statement. They are going to make right decision.


Suppliers (E)

Suppliers will require financial statements in order to decide whether it is safe to extend credit to a company.


From the text above, so many benefits of knowing about financial statement . Financial statements of the company are the most important information about the company. It gives a clear picture of the financial affairs of the company, its performance, which can be compared with the competitors and peers. Thus, various users, as discussed in the article, read and understand the financial statement of the company for their purposes.


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