USERS OF FINANCIAL INFORMATION

                             USERS OF FINANCIAL INFORMATION

The users of financial statements are people and institutions use financial statements for a large variety of business purposes and their ability to understand and analyze financial statements helps them to success in the business world. The various users of financial statements are classified and detailed as follows:

INTERNAL USERS

These include the managers , the employees and the owners.

THE MANAGERS. The financial statement is used to formulate contractual terms between the company and other organizations.  to provide a more comprehensive view of the financial position of an organization, financial analysis is performed with the information supplied in the financial statements. Financial statements can be used to t make decisions on which methods can be used to raise capital

THE EMPLOYEES: They need to analyze the financial records of the company they work for so they know if the company is doing well so that they can bargain for salary increases. they also need to find out if the company is doing well to ensure job security, if the company is failing then they can look for other jobs.

THE SHAREHOLDERS: They use financial statements to gage the managers performance. they also analyze the financial statement to find out if they should invest futher into the company or sale their stocks if the company is headed for a downfall.

EXTERNAL USERS.

These include the government agencies, suppliers, lenders, joint venture partners, rating agencies, customers, competitors, potential competitors, the B.O.D, politicians, lobbyists and issue groups.

GOVERNMENT AGENCIES: Like the Kenya Revenue Authority use the financial statements to find out if the tax being paid is correct. Financial statements have to be published every year to comply with Government regulations. The government would also want to find out if they can invest in the company and therefore need to see their financial statements.

SUPPLIERS: They would want to know if their customer is able to pay if and when they supply their goods. They also would want to know if their customers will be able to buy in their goods in future.

LENDERS/CREDITORS: They want to know if their debts will be paid.

RATING AGENCIES: They assign credit rating to the companies according to their performance using the financial statements.

CUSTOMERS: They need to know that they have continued supply of the goods they are using for production (evaluate if they are a reliable resource for their business) or consumers know if they need to change to another brand.

POTENTIAL COMPETITORS: Asses the entire industries performance. They also check the profitability of the industry.

COMPETITORS: Use other company’s financial results to benchmark their own results.

THE B.O.D: They need to assess the management’s performance.

POLITICIANS, LOBBYISSTS, ISSUE GROUPS: Need to find out what the company is doing, the environmental impact and their Cooperate Social Responsibility.

JOINT VENTURE PARTNERS: They need to know about the company and its financial situation.

REFERENCE;

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