Uses of Financial Information

Question 1

Prospective owner

Answer 1

• What is the return that I might get on this investment?
• How much profit is the buisness making. Is it a worthwhile investments?

Question 2

Creditor (suppliers, account payable)

Answer 2

• What credit limit should we give the business?
• How much profit is the business making to cover debt repayments?
• What other liabilities does the business have to pay?

Question 3

Bank Manager

Answer 3

• Do they have security to cover a loan?
• Should we increase the loan?
• What other liabilites do they have?
• What is the value of the net assets?
• Does the business make enough profit to pay the intrest payments?

Question 4

Government (IRD)

Answer 4

• Is the business paying the correct tax?
  -How much GST does the business owe?
  -How much income did the business make? (to calculate the tax to pay)

Question 5

Owners

Answer 5

-What return am I getting on my investments?
- How much profit am I making?
- Should I expand my business?
- Is my investments (capital) safe?
- What security (net assets) does the business have?

Question 6

Managers

Answer 6

• How much profit are we making?
• What were our sales? Did they improve?
• What inventory should we discount this week?
• Are there expenses we can cut back?
  -Are staff meeting their targets?