Using Financial Accounts To Make Decisions
Stakeholder Interactions with the Financial Accounts
Stakeholder | How they use the Balance Sheet | How they use the Income Statement |
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Investors/Shareholders | Used to identify the asset structure of the business and how their investment has been put to use Used to calculate the working capital of the business and determine its solvency Used to determine the rough value of a business, which helps make a judgement on whether their investment is growing
| Interested in revenues, costs and profits earned, business growth and dividend payments Shareholders may use ratio analysis tools to identify profit margins and returns on investment
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Management | Used to identify the financial position of the business at a given point in time It is useful to assess the working capital position of the business and determine if there are enough liquid assets to pay its bills Provides information on the capital structure of the business which helps guide decisions on whether to raise further funds through borrowing or via other means (e.g. share issue)
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Lenders/Creditors | | |
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Suppliers | | |
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Employees | | Interested in profits earned, the potential for wage increases, and job stability Employees may look at notes to the accounts that detail levels of executive pay
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Regulatory bodies/Tax authorities | | Tax authorities use financial statements to check the accuracy of tax returns and assess how much tax a business is liable to pay
The Income Statement can provide an insight into whether the business will continue to provide employment, place orders with other businesses and supply goods and services to the public sector
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Local community | | |
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