Users of Financial Information

• Managers:

  • Use profitability ratio to check organisation's performance in comparison to previous years and competitors.
  • Improve profitability for the future.
  • Identify where savings made and costs reduced.
• Owners/Potential Investors:

  • Interested in profitability, especially the Return on Equity Employed.
  • Compare their return with other investment opportunities.
  • Can decide to remain as an investor, increase or reduce their investment.
• Employees:

  • Assess profitability to determine if they can get a wage/salary increase.
  • Interested in the liquidity and sales revenue for job security.
• Competitors:

  • Measure the organisation's market share.
  • To find out if they may be a target for takeover.
  • To compare prices.
  • To compare GP% and NP%.
• Trade Payables (Suppliers):

  • Interested in overall profitability.
  • Liquidity to assess the likelihood of receiving payments for goods they have supplied or intend to supply to an organisation.
• Bank/Lenders:

  • Interested in overall profitability.
  • Interested in liquid to decide whether to supply finance or demand repayment of amounts already loaned.
• HMRC (Tax)

  • Interested in the profit made by an organisation.
  • Allows the IR to calculate tax due from the organisation.
• Members of the Public:

  • Profitability to ensure continued employment and local economic growth.