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 competitors are interested in the business profit to decide if it is higher or lower than theirs. They will want to compare the expenses and income of the business to theirs to see if they can make improvements to their business performance. Eg lower their distribution costs by cutting their delivery costs.
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 in a bank or share market. If it is sufficiently high profit he could decide to buy the business. He can also look at the profit to see if he can improve the business and make a better profit.
What decision do owner use the income statement for
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 purchasing more assets, can he borrow more money an pay off loans, can he afford a holiday, should he attempt to boost salers or lower expenses to lower expenses
