Although the records and reports transactions of business, many different parties benefit from this information. These people -called the users of financial statements-too often review the information for the purpose of making decisions.
Financial accounting information also helps users to measure the profitability of the company and performance. Stakeholders include owners, lenders, employees, suppliers and government agencies.
The owners are usually the most interested users of financial statements. Not only have an interest in the profits, but also on the amount of money as income retain staff. This information comes from the income statement. The owners want to know the amount of capital that the company uses to generate sales revenue.
Lenders have an interest in both the benefit of the company and cash flow. These users may have given loans to the company. Companies with an inability to repay loans increase the risk of the lender. Lenders typically require several months of financial statements for review before lending money. Regular updates are also required to ensure that borrowers still have the ability to repay loans.
Employees have an interest in the financial statements since they need guarantees for job retention. Employees may also have an interest in the share price of his company, which has a close relationship with the accounting information of the company.
Stock options for employees can increase or decrease precipitously based on the financial health of the company. Employees need this information to determine whether they should buy more or maintain their current level of investment.
Providers usually open trading accounts with many companies in the business environment. This allows companies to pay for purchases over a period of time rather than all at once. Providers prefer to work with financially sound companies to sell goods. This often assures payment in the future. Providers seeking new customers can also review the financial statements to find profitable and stable customers.
Mainly government agencies that assess taxes business- financial information reviewed to ensure that companies pay their fair share of tax revenues. Federal, state and local government agencies may have an interest in an enterprise.
Oversight agencies may review the financial statements of a company. A false statement or inappropriate financial material can result in a fine against a company. These agencies seek to protect shareholders of the company.