Using Financial Documents (Edexcel IGCSE Business)

How Financial Documents are used

• Stakeholders use financial documents to assess business performance and inform decision-making

How Stakeholders use Financial Documents

• Owners and managers use the quantitative data in financial documents to make a range of informed decisions

Diagram: Decisions Using Financial Documents

Managers and owners use financial documents to inform decisions about investments, financing, improving profit and managing assets

Investments

• The statement of comprehensive income can show whether a business can afford to purchase new non-current assets such as machinery, property or vehicles

• The impact of spending on research and development or overseas growth on costs and revenues can be determined

Financing

• The impact on the statement of financial position of taking out loans or other credit can be determined 

• The statement of financial position also identifies the value of share capital and retained profit

Improving Profit

• Ratio analysis can identify the impact of different types of cost on the businesses ability to generate profit

• The impact of increased prices on sales revenue can be identified in the statement of comprehensive income

Managing Assets

• The impact of leasing assets rather than owning them can be seen in both key financial documents

• Investment in non-current assets can be compared to investment in human resources to determine whether capital-intensive or labour-intensive production is most suitable

• Deciding whether to continue to maintain equipment or dispose of it can be determined by considering costs and revenues in the financial documents