Why Financial Statements are
prepared
The
financial statement mainly prepared for providing the information related to
financial position and financial performance of the organization. This
information is helpful in making informed decision making by the user of
financial statements. There are many users of financial statements and each
user information requirement may differ from other.
Financial
statement also provides useful information about the utilization of resources
by the management and performance of management may also be explained with the
financial results.
Who is the different user of
Financial Statements?
The
user of financial statement can be classified into investor, creditor, banker,
supplier, tax department, Regulator, statistic department etc.
What information needs of
investors?
Investors
make investment for better return therefore investor is interested in the
profitability of the organization. Investor is also want to play safe therefore
investor is also interested in the stability of the organization.
What are information needs of
employees?
Employees
are interested in good remuneration and bonuses and therefore mainly interested
in the profitability of the organization. Employee also wants job security and
therefore may be interested in financial position.
What are information needs of
lender?
Lender
wants to safely receive its loan and therefore interested in the liquidity of
the organization. Liquidity information may be seen in the cash flow statement
the current asset ratio also provides useful information about the liquidity of
the organization.
What are information needs of
Government?
Government
is interested in the profitability of the organization to collect tax .many
organization need different information to compile the national Data.
Why General public information
needs
General
public is interested in financial statement to establish its role in the local
community. Industry creates job opportunity for local community and also
announces some welfare project for the betterment of local community.
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