Using Financial Documents (Edexcel IGCSE Business)

• Stakeholders use financial documents to assess business performance and inform decision-making

How Stakeholders use Financial Documents

Stakeholder	Use of Financial Documents
Managers	Financial documents help managers track performance and identify areas for improvement This helps them make informed decisions to achieve business objectives
Employees	Employees use financial accounts to assess the stability of their employer This helps them determine their job security or support salary negotiations
Owners	Owners and shareholders can assess the profitability and growth potential of a business This helps them determine its ability to provide them with returns on their investment
Suppliers	Suppliers will want to assess the financial stability of key customers Financial documents can show whether customers can pay what they owe on time
Banks & other lenders	Financial statements can help to determine whether a business is creditworthy Lenders can assess the risk of lending money to the business and set appropriate credit terms

• Owners and managers use the quantitative data in financial documents to make a range of informed decisions

Diagram: Decisions Using Financial Documents

Managers and owners use financial documents to inform decisions about investments, financing, improving profit and managing assets

Investments

• The statement of comprehensive income can show whether a business can afford to purchase new non-current assets such as machinery, property or vehicles
• The impact of spending on research and development or overseas growth on costs and revenues can be determined

Financing

• The impact on the statement of financial position of taking out loans or other credit can be determined 
• The statement of financial position also identifies the value of share capital and retained profit

Improving Profit

• Ratio analysis can identify the impact of different types of cost on the businesses ability to generate profit
• The impact of increased prices on sales revenue can be identified in the statement of comprehensive income

Managing Assets

• The impact of leasing assets rather than owning them can be seen in both key financial documents
• Investment in non-current assets can be compared to investment in human resources to determine whether capital-intensive or labour-intensive production is most suitable
• Deciding whether to continue to maintain equipment or dispose of it can be determined by considering costs and revenues in the financial documents