Outcome 3 Revision

Question 0

Trade creditors

Answer 0

Relationship: sell supply to companies on finance
Interested in liquidity
Why? They want to know cash position of company so they will know if they can pay them by the appropriate date. Also interested in particular in doing business with companies that have good prospects for future so they may potentially continue to do business with them.
Where? In the cash flow statement and the balance sheet.

Question 1

Management

Answer 1

Relationship: responsibility
Interested in efficiency (low production costs and high profits)
Why? Bonuses based on profits achieved
Where? Mostly balance sheet but some in trade profit and loss account

Question 2

Shareholders

Answer 2

Relationship: owners who have bought shares in the business
Information: profitability and efficiency
Why? Amount of profits will affect dividends received. Assessing the efficiency helps evaluate the performance I company and it’s management. This helps when deciding whether to retain shares, sell shares or purchase more shares.
Where? Information about profitability can be found in the trade profit and loss account. Most of the information about efficiency can be found in the balance sheet but some can be found in the trade profit and loss account.

Question 3

Government agencies

Answer 3

Relationship: this group covers a wide range of activities but is in a more privileged position than most because in many cases they have a legal right to a variety of financial information
Info: included in this group is HM Revenue and Customs who are particularly interested in profitability for tax purposes. They are interested in sales and expense items for tax purposes, being able to check that all Tax returns are accurate.
Where? They can find information about profitability in the trade, profit and loss account.