Users of financial information
As you know different stakeholders in an organisation have an interest in a company doing well. Therefore many stakeholders pay great attention to financial information a firm may provide or publish.
Owners would use the return on capital employed ratio to work out how much money they will receive back for their investment and decide whether to increase their stake in the firm or withdraw their capital.
Managers will compare last year’s results with current performance using ratios. They will also compare what sales figures and budget projections are in line with actual figures. They will then make decisions based on this information which will affect the operations of the firm.
Employees/Trade Unions would use financial information to look at the overall health of the organisation and decide whether their jobs are safe or if it is a good time to negotiate a pay rise.
Creditors will normally be suppliers who will be interested to see if the firm is meeting its demands and in a position to pay its suppliers. Future contracts could depend on such issues.
Banks are interested in the financial information published by the firm as they will gain insight into how capable the firm is of paying back any loans or mortgages they may have currently with the lender.
Government/Inland Revenue are concerned with a firm’s financial information as it is the job of the Inland Revenue to tax company’s profits.
They will aim to ensure the firm is being taxed properly.
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