Question
In: Accounting
Critically explain the importance of considering the audience for financial statement analysis
Critically explain the importance of considering the audience for financial statement analysis
Solutions
Expert Solution
Answer:-
Importance of considering the audience or users for the analysis of the financial statements are:-
1) Owners.
2) Management.
3) Creditors.
4) Employees.
5) Investors.
Importance of considering the audience or users for the analysis of the financial statements are:-
1) Owners - An owners used to provide for the funding or capital for an entity. It used to possess for the business that have been conducted for employed in proper manner by evaluating the financial statements.
2) Management - Management of business is used to be interested for the entity's position. Management must study the merits as well as demerits for the business activities. Management is actually interested in the financial statements for the profitable for the business.
3) Creditors - Creditors are those, who used to supply for the goods on credit or lenders of the funds. It has progress as well as prosperity for an entity for an entity for the creditors. P&L account as well as balance sheet for knowing the soundness for the entity.
4) Employees - Bonus payment used to depend on the basis of the size of profit that have earned by the company. It used to be depended on regular income. Demand used to occur for wage rise, working conditions, and bonus, etc.,.
5) Investors - Investors used to take an advantage for the information of wealth for the financial statements of the company, which help in an evaluation of the form as potential investment. For an overall profitability, net income is used to start point at analyzing the financial statements.
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