users of accounts
It is easy to assume that the only users of accounting information are shareholders - since it is a requirement of company law that shareholders must receive periodic accounting statements. However, in reality there are many users of accounts. The table below summarises the main user groups and provides examples of their areas of interest in accounts:
| User | Interest in / Use of Accounting Information |
| Investors | Investors are concerned about risk and return in relation to their investments. They require information to decide whether they should continue to invest in a business. They also need to be able to assess whether a business will be able to pay dividends, and to measure the performance of the business' management overall. The key accounting information for an investor is therefore: - Information about growth - sales, volumes - Profitability (profit margins, overall level of profit) - Investment (amounts invested, assets owned) - Business value (share price) - Comparative information of competitors |
| Lenders | Banks and loan stockholders who lend money to a business require information that helps them determined whether loans and interest will be paid when due. The key accounting information for lenders is therefore: - Cash flow - Security of assets against which the lending may be secured - Investment requirements in the business |
| Creditors | Suppliers and trade creditors requirement information that helps them understand and assess the short-term liquidity of a business. Is the business able to pay short-term debt when it falls due? Creditors will, therefore, be looking for information on: - Cash flow - Management of working capital - Payment policy |
| Debtors | Customers and trade debtors require information about the ability of the business to survive and prosper. As customers of the company's products, they have a long-term interest in the company's range of products and services. They may even be dependent on the business for certain products or services. Customer will be particularly interested in: |
| Employees | Employees (and organisations that represent them - e.g. trade unions) require information about the stability and continuing profitability of the business. They are crucially interested in information about employment prospects and the maintenance of pension funding and retirement benefits. They are also likely to interested in the pay and benefits obtained by senior management!. Employees will, therefore look for information on: |
| Government | There are many government agencies and departments that are interested in accounting information. For example, the Inland Revenue needs information on business profitability in order to levy and collect Corporation Tax. Customs & Excise need accounting information to verify Value Added Tax ("VAT") returns; local government need similar information to levy local taxes and rates. Various regulatory agencies (e.g. the Competition Commission and the Environment Agency) need information to support decisions about takeovers and grants, for example. |
| Analysts | Investment analysts are an important user group - specifically for companies quoted on a stock exchange. They require very detailed financial and other information in order to analyse the competitive performance of a business and its sector. Much of this is provided by the detailed accounting disclosures that are required by authorities such the London Stock Exchange. However, additional accounting information is usually provided to analysts via informal company briefings and interviews. |
| Public at large | Interest groups, formed by various groups of individuals who have a specific interest in the activities and performance of businesses, will also require accounting information. |
..
..
No comments:
Post a Comment