What information would these users of financial information be interested in

Read this article to learn about the following thirteen users of financial statements, i.e., (1) Shareholders, (2) Debenture Holders, (3) Creditors, (4) Financial Institutions and Commercial Banks, (5) Prospective Investors, (6) Employees and Trade Unions, (7) Important Customers, (8) Tax Authorities, (9) Government Departments, and Others.

1. Shareholders:

Divorce between ownership and management and broad-based ownership of capital due to dispersal of shareholdings have made shareholders take more interest in the financial statements with a view to ascertaining the profitability and financial strength of the company.

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2. Debenture Holders:

The debenture holders are interested in the short-term as well as the long-term solvency position of the company. They have to get their interest payments periodically and at the end the return of the principal amount.

3. Creditors:

Potential suppliers of goods and materials and others doing business with the company are interested in the liquidity position of the company.

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4. Financial Institutions and Commercial Banks:

These financial institutions are interested in the solvency – short-term as well as long-term – and profitability position of the company.

5. Prospective Investors:

Prospective Investors are interested in the future prospects and financial strength of the company.

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6. Employees and Trade Unions:

Employees and Trade Unions are interested in the profitability position of the company.

7. Important Customers:

Important Customers who want to make long-standing contract with the company are interested in its financial strength.

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8. Tax Authorities:

Tax Authorities are interested in the profits earned by the company.

9. Government Departments:

Government Departments dealing with the industry in which the company is engaged are interested in the financial information relating to the company.

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10. Economists and Investments Analysts:

Economists and Investments Analysts are interested in the financial and other information of the company.

11. Members of Parliament:

Members of Parliament the Public Accounts Committee and Estimates Committee – are interested in the financial information of the government companies

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12. SEBI and Stock Exchanges:

SEBI and Stock Exchanges are interested in the prospects and performance of listed companies with a view to protecting the interests of investors.

13. Managers:

Managers are interested in knowing through the financial statements the present position and future prospects of the company. This is mainly to review the company’s progress and position and take decisions for the future.

The financial accounts provide a wealth of information that is useful to various users of financial information.

Investors

Investors are concerned about risk and return in relation to their investments. They require information to decide whether they should continue to invest in a business. They also need to be able to assess whether a business will be able to pay dividends, and to measure the performance of the business' management overall

Lenders

Banks and other financial institutions who lend money to a business require information that helps them determined whether loans and interest will be paid when due

Creditors

Suppliers and trade creditors require information that helps them understand and assess the short-term liquidity of a business. Is the business able to pay short-term debt when it falls due?

Customers & Debtors

Customers and trade debtors require information about the ability of the business to survive and prosper. As customers of the company's products, they have a long-term interest in the company's range of products and services. They may even be dependent on the business for certain products or services

Employees

Employees (and organisations that represent them - e.g. trade unions) require information about the stability and continuing profitability of the business. They are crucially interested in information about employment prospects and the maintenance of pension funding and retirement benefits. They are also likely to interested in the pay and benefits obtained by senior management!

Government

There are many government agencies and departments that are interested in accounting information. For example, the government needs information on business profitability in order to levy and collect Corporation Tax. Various regulatory agencies (e.g. the Competition Commission and the Environment Agency) need information to support decisions about takeovers and grants, for example.

Analysts

Investment analysts are an important user group - specifically for companies quoted on a stock exchange. They require very detailed financial and other information in order to analyse the competitive performance of a business and its sector. Much of this is provided by the detailed accounting disclosures that are required by the London Stock Exchange. However, additional accounting information is usually provided to analysts via formal company briefings and interviews.

General public

Interest groups, formed by various groups of individuals who have a specific interest in the activities and performance of businesses, will also require accounting information.

What are users of financial statements interested in?

Why would customers be interested in financial statements?

What financial information would lenders be interested in?

Which of the following is a user of financial information?