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Uses and Users of Accounts (Managers (they will use the accounts to help…
Uses and Users of Accounts
Managers
they will use the accounts to help them keep control over the performance of each product or each division
-This will allow them to take better decisions.
-Ratios can be compared with other firms in the industry/competitors and also with previous years to see how they’re doing.
Shareholders
since they are the owners of a limited company, it is a legal requirement that they be presented with the financial accounts of the company.
From the income statements and the profitability ratios, especially the ROCE, existing shareholders and potential investors can see whether they should invest in the business by buying shares.
They will also compare the ratios with other companies and with previous years to take the most profitable decision.
Creditors
The balance sheet and liquidity ratios will tell creditors (suppliers) the cash position and debts of the business.
They will only be ready to supply to the business if they will be able to pay them If there are liquidity problems, they won’t supply the business as it is risky for them.
Banks
Similar to how suppliers use accounts, they will look at how risky it is to lend to the business. They will only lend to profitable and liquid firms.
Goverment
the government and tax officials will look at the profits of the company to fix a tax rate and to see if the business is profitable and liquid enough to continue operations and thus if the worker’s jobs will be protected.
Trade unions and worker
they will want to see if the business’ future is secure or not.
Other businesses
managers of competing companies may want to compare their performance too or may want to take over the business and wants to see if the takeover will be beneficial.