FINANCIAL DOCUMENTS USE

• Who may use financial documents to assess the performance of a business?

  • managers
  • employees
  • owners
  • internal shareholders
  • external shareholders
• Why may managers use financial documents to assess the performance of a business?

  the profit made by a business is a reflection of their own performance. If the company does well they may be in a position to ask the owners for higher rewards
• Why may employees use financial documents to assess the performance of a business?

  they may need financial information during wage negotiations. E.g. if the statement of comprehensive income shows that profits have increased. They may also look at accounting information to see if their jobs are secure
• Why may owners use financial documents to assess the performance of a business?

  they would be interested in the financial position of the business and may also want to see if targets have been met for the year
• Why may internal shareholders use financial documents to assess the performance of a business?

  they would be interested in the performance of the business. They may also look at the size of dividends and use ratio analysis to see how their investment is performing and compare with other companies they could invest. It will also show whether the business has grown
• Why may external shareholders (BANKS) use financial documents to assess the performance of a business?

  they need up-to-date financial information when deciding if to lend money, will look at the accounts to see if they can pay a loan back with interest and they will focus on whether the business already has any large debts
• Why may external shareholders (SUPPLIERS) use financial documents to assess the performance of a business?

  they will want to assess the creditworthiness of the business and assess whether new customers are a good risk
• What are examples of the decisions that can be made when using financial documents?

  • funding decisions
  • reducing costs
  • increasing profitability
  • investment decisions
• What are some other users of financial documents?

  • government (used to monitor the progress of the economy)
  • competitors (used to analyse them to make comparisons and gather information when wanting to perform a takeover)
  • the media (used for creating reports for the public to read/watch)
  • tax authorities (used when working out how much to take from wages)
  • auditors (used for checking financial accounts)
  • registrar of companies (used to make the final accounts every year available to the public)
• What is excise duties?

  taxes on selected goods, such as those on petrol and tobacco in the uk
• What is auditing?

  an accounting procedure that thoroughly checks the accuracy of a companies accounts