Question
In: Accounting
QUESTION 2 a. Identify two users of financial information and give one informational need for each...
QUESTION 2
a. Identify two users of financial information and give one informational need for each of them.
b. Explain why the needs of stakeholders must be met by an organisation.
Solutions
Expert Solution
(a) Users of financial information:
1. Lenders: This includes the creditors as well as the financial institutions from which the company might have borrowed money. They would want to know about the performance of the company because that would help them in determing the credit worthiness of the copmany, and whether it would be beneficial for them to continue theri relationship with the company.
2. Owners and investors: These are the people that have invested their money in the company. Thus, ensuring that they would be eligible for some returns, and whether the business is running profitably is one of the purpose why they would want to know about the copmany's performance.
(b) Stakeholders refers to all the people who would have an interest in our company's performance. It is necessary to meet the needs of stakeholders because:
1. Businesses are set up and operated to produce profit for their owners and investors
2. Stakeholders' ability to help the business grow further (eg. its customers, employees, creditors etc.)
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