The management of the company is the first and foremost user of the financial statements. Although they are the ones who prepare the financial statements, the board and the management need to refer to them while considering the progress and growth of the company. The management of the company looks at the financial statement from the perspective of liquidity Perspective Of Liquidity Liquidity shows the ease of converting the assets or the securities of the company into the cash.
Liquidity is the ability of the firm to pay off the current liabilities with the current assets it possesses. Simply put, the management of the company needs financial statements to make decisions about the business. Investors are the owners of the company. They would like to understand and kept updated with the financial performance of the company.
They would like to make the decision based on the financial statement, whether they need to keep invested or move out of the company based on its performance. Customers need to view the financial statements of the company from which they are procuring goods or services.
Big clients would like to have a long-term partnership or contract with the company; thus, they would like to work with a company that is financially stable. Competitors would like to know the financial status of the competing company. They would like to maintain a competitive edge on their competitors and hence, would like to know the financial health of the other company.
Further, they could decide to change their strategy looking at the statements. Government agencies like the Income-tax department, the sales tax Sales Tax The government levies sales tax on the consumption of various goods and services as the percentage added to the product and services from which the government earns revenue and does the company's welfare. In the United States, 38 different states have different taxes, from Alaska 1.
They would like to make future tax predictions based on the performance of the company and industry practices. Employees look at the financial statement of the company from different perspectives.
Skip to content. Financial Statements provide useful information to a wide range of users:. Prospective Investors. Financial Institutions. General Public. Links and relationships between financial statements. Limitation of accounting and financial reporting.
Share This Post. Share on facebook. Share on twitter. Share on linkedin. Share on print. Otherwise, if the company is doing badly, they might face the risk of losing their job. Hence, they usually want to know how the company is doing and whether the company can continue to supply them the goods or materials into the future or not.
This might occur with specialized products; e. Suppliers usually provide the credit term for the goods or materials the company purchases, hence they want to want to know if they will get paid after goods or material delivered to the company.
They might decide to provide goods or materials to the company only on cash purchase if the company is doing badly. They are the people who provide loans to the company; hence they want to know if the company can to pay back the loan so they can get their money back. Government might concern how it should set policies based on the economy and how the company impacts the economy. Another reason the government wants to know about how the company is doing is related to the tax that the company needs to pay.
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