Financial statements are important to investors because they can provide enormous information about a company’s revenue, expenses, profitability, debt load, and the ability to meet its short-term and long-term financial obligations. There are three major financial statements.

Who are the main users of financial reporting?

The following list identifies the more common users and the reasons why they need this information:

• Company management.
• Competitors.
• Customers.
• Employees.
• Governments.
• Investment analysts.
• Investors.
• Lenders.

What are the five types of financial statements?

They are: (1) balance sheets; (2) income statements; (3) cash flow statements; and (4) statements of shareholders’ equity. Balance sheets show what a company owns and what it owes at a fixed point in time. Income statements show how much money a company made and spent over a period of time.

What is the main purpose of financial statements?

Financial statements are written records that convey the business activities and the financial performance of a company. Financial statements are often audited by government agencies, accountants, firms, etc. to ensure accuracy and for tax, financing, or investing purposes. Financial statements include: Balance sheet.

Why do stakeholders need financial information?

Stakeholders of the company require the financial information for following reasons. To know how well the company is doing. To find company has earned more money than they spent. To get an idea about strategic and tactical plans of the management.

Who are stakeholders of financial statements?

Stakeholders are persons or groups that rely on financial information to make decisions. Stakeholders include stockholders, creditors, governmental and regulatory agencies, customers, and managers and other employees. Stockholders are owners of a business.

When do customers need to see financial statements?

Customers. When a customer is considering which supplier to select for a major contract, it wants to review their financial statements first, in order to judge the financial ability of a supplier to remain in business long enough to provide the goods or services mandated in the contract. Employees.

Why are government agencies interested in financial statements?

Government agencies need to know how the economy is performing in order to plan financial and industrial policies. The tax authorities also use financial statements as a basis for assessing the amount of tax payable by a business. Suppliers need to know if they will be paid.

What are the main purpose of financial statements?

1 Credit decisions. Lenders use the entire set of information in the financials to determine whether they should extend credit to a business, or restrict the amount of credit already extended. 2 Investment decisions. 3 Taxation decisions. 4 Union bargaining decisions. …

When to use financial statements to assess a supplier?

use Financial Statements to assess whether a supplier has the resources to ensure the steady supply of goods in the future. This is especially vital where a customer is dependant on a supplier for a specialized component.