Users of the Income Statement Flashcards
What Decision does a Bank Manager use the Income statement for.
They want to see if businesses can repay new or existing loans out of profit.
What Decision does an employee use the Income statement for.
The employee is interested in the business’s profit to decide if it is high enough to ensure job security or to decide to ask for a pay rise.
What Decision does the IRD use the Income statement for.
They are concerned that all businesses pay the right amount of taxes.
The IRD is interested in making sure that the business profit is accurate so they can decide if the correct amount of tax is calculated.
What Decision do competitors use the Income statement for.
The Competitor is interested in the business profit to see if it is higher or lower than theirs. They want to compare income and expenses of the business to theirs to decide if they can make improvements to their business performance. E.g. lower their distribution costs by cutting delivery expenses.
What Decision do potential owners use the Income statement for.
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. He could also look at the profit to see if there was an opportunity to improve it.
What decisions do the owner make when looking at 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 installments off.
Can he take the family on holiday.
Should he try to boost sales or lower expenses to increase profit
