Users of the Income Statement Flashcards
What decision does the bank manager make with an income statement?
The bank manager wants to decide if the business can pay loans out of profit.
What decision does the employee make with an income statement?
The employee is interested in the Business’s profit to decide if it is high enough to ensure their job will continue or to decide if to ask for a pay rise.
What decision does the Inland Revenue Department make with an income statement?
The IRD is interested in making sure the business profit is accurate so they can decide if the correct amount of tax is calculated.
What decision does the competitors make with an income statement?
The competitor is interested in the business profit to see if it is higher or lower than theirs. They will want to compare income and expenses to theirs to see they can make improvements to their business performance e.g. lower their distribution costs by cutting delivery expenses.
What decision does the potential owner (not investor) make with an income statement?
A potential owner is interested in the profit of the business to see if it is higher than what he could earn if he invested his money in the bank or share market. If it is a sufficiently high profit he could decide to buy the business.
What decision does the owner make with an income statement?
The owner is interested in the profit of the business to decide whether the business is worth keeping or selling, to expand the business by buying more assets, can he borrow more money and pay the loan instalments off, can he take the family away on a holiday, should he try to boost sales or lower expenses to increase profit.
