Question

1. Who the Users of financial statement information are and the different purposes they are used for.

Answer 1

Users of  financial statement information and different purposes they are used for :
1) Investors : Investors are the owners of the company. They would like to understand and kept updated with the financial performance of the company. They would like to make the decision based on the financial statement, whether they need to keep invested or move out of the company based on its performance.

2) Customers : Customers need to view the financial statements of the company from which they are procuring goods or services. Big clients would like to have a long-term partnership or contract with the company; thus, they would like to work with a company that is financially stable. Further, a financially strong company can provide its customers with credit sales and can deliver products and services at a discount than the market.

3) Competiors : Competitors would like to know the financial status of the competing company. They would like to maintain a competitive edge on their competitors and hence, would like to know the financial health of the other company. Further, they could decide to change their strategy looking at the statements.
4) Mangement : The management of the company is the first and foremost user of the financial statements. Although they are the ones who prepare the financial statements, the board and the management need to refer to them while considering the progress and growth of the company.
5) Employees : Employees look at the financial statement of the company from different perspectives. They would like to know if the company is doing as their bonus and increments depend on the financial performance of the company.
6) Lenders : lenders like traditional banks, financial institutions, creditors would like to check the ability of the company to pay the debt. Thus, they go through the financial statements of the company and see if they would provide a loan.
7) Suppliers : Suppliers like the customers would like to deal with companies that have good financial health. Thus, they are also users of financial statements and make decisions to provide credit to the company.