2. Users of financial information

Question 1

Explain why sole proprietor and managers need the financial information.

Answer 1

To make decision on how to plan, control, monitor and operate the business. To decide whether to continue the business or not.

Question 2

Explain why employees need the financial information.

Answer 2

To know if the business is profitable to evaluate their career prospect so as to decide whether to continue working for the business or not.

Question 3

Explain why bankers and lenders need the financial information.

Answer 3

To access the liquidity of the business so as to decide whether to grant the business loan or not.

Question 4

Explain why investors need the financial information.

Answer 4

To access whether to increase, decrease or maintain their investment in the business. Potential investors may decide whether to invest in the business or not.

Question 5

Explain why suppliers need the financial information.

Answer 5

To decide to sell goods to business or credit or not.

Question 6

Explain why customers need the financial information.

Answer 6

To access if business is able to provide after-sales service so as to decide whether buy from the business or not.

Question 7

Explain why government need the financial information.

Answer 7

To access how much tax to collect from the business.