Users of the Income Statement Flashcards
What decision does a bank manager make with an income statement?
The bank manager wants to decide if the business can repay new or existing loans out of profit.
What decision does The Inland Revenue Department (IRD) make with an income statement?
They are concerned that all businesses pay the right amount of taxes.
The IRD is interested in making sure the business profit is accurate so they can decide if the correct amount of tax is payed.
What decision does an employee make with an income statement?
They are interested in job security and pay rises.
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 a competitor make with an income statement?
They are concerned to see if their business is performing better than yours.
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 decide if they can make improvements to their business performance. Eg. Lower their distribution costs by cutting delivery expenses.
What decision 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 on the share market. If it is a sufficiently high profit he could decide to buy the business.
