Users of the Income Statement Flashcards
What decisions does a bank manager make with an income statement?
The bank manager wants to decide if the business can repay the loans out of profit.
What decisions does an employee make with an income statement?
The employee is interested in the business’ profit to decide to decide if it is high enough to ensure their job will continue or to decide if to ask for a pay rise.
What decisions does the IRD 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 decisions does a competitor 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 of the business to theirs to see if they can make improvements to their business performance e.g. lower distribution costs.
What decisions does a potential owner 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 decisions does an 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 installments off
Can he take the family away on a holiday
Should he try to boost sales or lower expenses to increae profit
