THE IMPORTANCE OF FINANCIAL STATEMENTS TO DIFFERENT GROUPS
Introduction This report will outline the various reasons why different groups are interested in the financial statements of a company. Financial statements are formal documents that show the financial activities of a business, person or entity. When a company makes a decision, they look at the benefits and drawbacks before reaching a conclusion. It is important to assess the company’s financial position in order to make sound decisions because it may be the difference between making a profit and suffering a loss when working with the business. This is why various groups such as management, creditors, investors, unions, governments and politicians are interested in a company’s …show more content…
They are the people that use financial statements to see if their business is earning a profit or loss. They use income statements (refer to figure 1 on p. iii) to analyze the net income or net loss. Income statements are helpful for management to create goals and strategies for the company, and to make important decisions. Furthermore, they use financial statements to compare what year or month they made a profit or loss. By comparing financial statements, management can see where their strengths and weaknesses are and can quickly work on their shortcomings. Another type of financial statement that is useful to management is the cash flow statement (refer to figure 3 on p. iv). It is a report about the inflows and outflows of cash and is useful to see how much money is being spent on certain activities such as operating, investing, and financing activities during the year. In addition, financial statements allow management to decide if they can expand their business or withdraw money for personal …show more content…
In small businesses, investors may be friends or family members. Whereas in large businesses, investors are more likely to be companies listed on stock exchanges, as well as people and its institutions that are ready to provide money in exchange for the right to become shareholders or bondholders. They help businesses with funds which aids them in earning more profit. Investors will gladly provide cash to the business if there is a good chance of future profits. To know if a company is making a profit or a loss, investors would want to look at the income statements (refer to figure 1 on p. iii) of the business. These financial statements are crucial for the investor as it gives them an idea of whether it would be profitable to invest in the
Introduction This report will outline the various reasons why different groups are interested in the financial statements of a company. Financial statements are formal documents that show the financial activities of a business, person or entity. When a company makes a decision, they look at the benefits and drawbacks before reaching a conclusion. It is important to assess the company’s financial position in order to make sound decisions because it may be the difference between making a profit and suffering a loss when working with the business. This is why various groups such as management, creditors, investors, unions, governments and politicians are interested in a company’s …show more content…
They are the people that use financial statements to see if their business is earning a profit or loss. They use income statements (refer to figure 1 on p. iii) to analyze the net income or net loss. Income statements are helpful for management to create goals and strategies for the company, and to make important decisions. Furthermore, they use financial statements to compare what year or month they made a profit or loss. By comparing financial statements, management can see where their strengths and weaknesses are and can quickly work on their shortcomings. Another type of financial statement that is useful to management is the cash flow statement (refer to figure 3 on p. iv). It is a report about the inflows and outflows of cash and is useful to see how much money is being spent on certain activities such as operating, investing, and financing activities during the year. In addition, financial statements allow management to decide if they can expand their business or withdraw money for personal …show more content…
In small businesses, investors may be friends or family members. Whereas in large businesses, investors are more likely to be companies listed on stock exchanges, as well as people and its institutions that are ready to provide money in exchange for the right to become shareholders or bondholders. They help businesses with funds which aids them in earning more profit. Investors will gladly provide cash to the business if there is a good chance of future profits. To know if a company is making a profit or a loss, investors would want to look at the income statements (refer to figure 1 on p. iii) of the business. These financial statements are crucial for the investor as it gives them an idea of whether it would be profitable to invest in the