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Question 5 Stakeholders of LMG SAOG have been referring the company financial reports for variety of...

Question 5

Stakeholders of LMG SAOG have been referring the company financial reports for variety of reasons.

(a) Select FIVE of stakeholders from your own choice and explain the reasons for them to use LMG SAOG’s financial information.

The following information is available for LMG SAOG as at 31st December 2019.

Debtors

11000

Debentures

15400

Creditors

12900

Retain Earnings

(1201)

Bank Overdraft (OD)

1270

Buildings

45000

Land

25000

Cash in hand

12800

Inventories

11300

Share capital

?

(b) Prepare LMG SAOG’s balance sheet as at 31st December 2019 and find the value of share capital. Note: Balance sheet must be in good format and with appropriate headings.

Solutions

Expert Solution

a) Five users of the financial statements:

1. Investors: Investors wants to know the potential profits and the security of their investment and financial statements helps us to know the solvency and financial strength of the company where they invested.

2. Lenders: Lenders wants to know if they will be repaid or not and also the value of asset given to them as a security.

3. Employees: They want to know if their employment is secure and any chances of pay rises after saw the financial position of the company i.e. balance sheet.

4. Government: Govt wants to know how economy is performing so that they will take the decisions about financial and industrial policies.

5. Suppliers: They want to know if they will be paid for their products or services rendered. New suppliers may also require reassurance about the financial health of a business before agreeing to supply goods.

b) Prepare LMG SAOG’s balance sheet as at 31st December 2019 and find the value of share capital. Note: Balance sheet must be in good format and with appropriate headings.

ekkarill92 answered 2 years ago
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