Stakeholder
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How they use the Balance Sheet
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How they use the Income Statement
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Investors/Shareholders
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- Used to identify the asset structure of the business and how their investment has been put to use
- Used to calculate the working capital of the business and determine its solvency
- Used to determine the rough value of a business, which helps make a judgement on whether their investment is growing
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- Interested in revenues, costs and profits earned, business growth and dividend payments
- Shareholders may use ratio analysis tools to identify profit margins and returns on investment
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Management
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- Used to identify the financial position of the business at a given point in time
- It is useful to assess the working capital position of the business and determine if there are enough liquid assets to pay its bills
- Provides information on the capital structure of the business which helps guide decisions on whether to raise further funds through borrowing or via other means (e.g. share issue)
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- Interested in key performance data such as an improvement in sales revenue and net profit
- This data can aid in business decision-making
- Financial data can provide evidence to support the payment of bonuses
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Lenders/Creditors
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- Look at the balance sheet to evaluate the company's solvency
- They are interested in the company's ability to pay back its debts
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- Consider profit generated, as this could indicate the stability of the business and level of risk it presents
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Suppliers
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- Businesses with low levels of working capital may find it difficult to pay short-term debts and so suppliers may offer trade credit, but with stricter terms
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- Interested in the continued success of the company
- This information is also used by suppliers to determine the level of trade credit offered to businesses
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Employees
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- Used to answer questions such as:
- Is the business financially stable or are jobs at risk?
- Has the businesses performance improved or worsened?
- What is the business spending its money on?
- How much are senior executives paid?
- How much tax is the business paying?
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- Interested in profits earned, the potential for wage increases, and job stability
- Employees may look at notes to the accounts that detail levels of executive pay
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Regulatory bodies/Tax authorities
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- Regulatory bodies use financial statements to ensure a business is complying with accounting standards and regulations
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- Tax authorities use financial statements to check the accuracy of tax returns and assess how much tax a business is liable to pay
- The Income Statement can provide an insight into whether the business will continue to provide employment, place orders with other businesses and supply goods and services to the public sector
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Local community
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- Interested in the stability of the business and what this may mean for jobs in the community
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- Another interest is to see if the firm is generating enough profit to perhaps approach them for local sponsorship
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