Chapter 24 Flashcards
Interested parties within the business, such as owners and managers
Internal users
Interested parties outside the business organisation, such as trade payables, government
External users
What are the two groups of internal users?
Owners, managers
Why do owners need accurate financial information?
To tell them how much they have lost or earned during the accounting period and what their future earnings. So that they can make important decisions about whether to expand/contract/shut down the business
Why do managers need accurate financial information?
To assist them with their tasks of planning, controlling and making decisions about the working of the business
What are four groups of external users?
Trade payables, banks, investors, club members
Why would trade payables be interested in accurate financial information?
To know the business’ liquidity position and its ability to pay its debts in the short term
Why would banks be interested in accurate financial information?
Because the business has applied for a loan from them
Why would investors be interested in accurate financial information?
They will be concerned with the risk of investing and the returns they can get annually, and (if a current investor) the return on capital employed
Why would club members be interested in accurate financial information?
To know whether there are enough funds for facilities to be maintained in a good state of repair and whether they can be expanded in future
Why would the government be interested in accurate financial information?
To determine the tax due
Why would the tax authorities be interested in accurate financial information?
To check whether taxes have been accurately calulated and paid
Why would employees be interested in accurate financial information?
To determine whether they can ask for salary raises or bonuses (if the business has been very profitable) and to work out their levels of job security and opportunities for future promotions
Why would cucstomers be interested in accurate financial information?
To know whether the business will continue to supply them with raw materials and components in the future, whether after-sales service will continue, whether they will still be able to get spare parts
Why would competitors be interested in accurate financial information?
To assess how well they are doing in competition (ratio analysis)
