Chapter 32: The Use Of Financial Documents (Version) Flashcards
Why do businesses produce accounts?
To assess business performance and inform decision-making.
How do financial documents help businesses?
They track financial health and provide insights for growth strategies.
Who are the key stakeholders interested in financial documents?
Managers, employees, owners, shareholders, banks, suppliers, and investors.
Which external groups use financial documents?
Government, competitors, media, tax authorities, auditors, and the registrar of companies.
Why do managers assess financial documents?
To evaluate company performance and set future goals.
How do managers use financial documents to compare performance?
They compare financial data with competitors to asses market position.
How do financial documents help managers with rewards?
If profits are high, they may request higher salaries or bonuses.
How do employees use financial documents?
To assess job security and negotiate wages based on business profits.
Why are owners interested in financial documents?
To check if profit targets are met and assess business performance.
How do shareholders use financial documents?
To evaluate dividend size, business growth, and investment performance.
Why do banks require financial documents?
To evaluate a business’s ability to repay loans with interest.
What financial aspects do banks analyze?
Working capital, existing debt, and financial trends over time.
Why do suppliers check financial documents?
To assess a business’s creditworthiness before granting trade credit.
How do investors use financial documents?
To analyze company growth and assess investment potential.
Why do businesses use financial documents for decision-making?
To make informed funding, cost reduction, and investment decisions.
How do financial documents help in funding decisions?
By assessing liquidity ratios and determining cash flow needs.
How do businesses use financial documents to reduce costs?
By comparing profit margins over time to identify rising expenses.
How can financial documents help increase profitability?
By adjusting pricing, sourcing cheaper suppliers, or controlling wage costs.
Why are financial documents useful for investment decisions?
They help assess financial strength and risk-taking ability.
How does the government use financial documents?
To monitor the economy and evaluate economic policies.
How do competitors use financial documents?
To compare performance and assess potential takeovers.
Why does the media report on financial documents?
To inform the public and analyze business trends.
Why do tax authorities need financial documents?
To calculate corporate taxes, VAT, and excise duties.
What is the role of auditors in financial reporting?
To check the accuracy of financial documents through auditing.
What is the role of the registrar of companies?
To collect and publish financial accounts of limited companies.
Excise Duties
Taxes on selected goods, such as petrol & tobacco.
Auditing
Accounting procedure that checks thoroughly the accuracy of a company’s acounts.
Quantitative information
Information expressed in numbers.
