Essay (35points)
Below are the list of users of financial statements as stated in the Framework. Discuss their interests in the financial statements. (5 points each)
1.Investors
2.Employees
3.Lenders
4.Suppliers and other trade creditors
5.Customers
6.Government and other agencies
7.The public
Answers & Comments
Answer:
1.Investors- financial statements are important to investors because they can provide enormous information about a company's revenue, expenses, profitability, debt load, and the ability to meet its short-term and long-term financial obligations.
2.Employees- employees are interested in the company's profitability and stability. They are after the ability of the company to pay salaries and provide employee benefits. They may also be interested in its financial position and performance to assess company expansion possibilities and career development opportunities.
3.Lenders- lenders need to know if they will be repaid. This will depend on the solvency of the company, which should be revealed by the statement of financial position. ... The tax authorities also use financial statements as a basis for assessing the amount of tax payable by a business. Suppliers need to know if they will be paid.
4.Supliers and other trade creditors- like lenders, trade creditors or suppliers are interested in the company's ability to pay obligations when they become due. They are nonetheless especially interested in the company's liquidity – its ability to pay short-term obligations
5.Costumers- is to provide information about the financial position, performance and financial adaptability of an enterprise, that is useful to a wide range of users for assessing the stewardship of management and for making economic decisions".
6.Governement and other agencies- they require Financial Statements to determine the correctness of tax declared in the tax returns. Government also keeps track of economic progress through analysis of Financial Statements of businesses from different sectors of the economy.
Explanation:
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