Users of Financial Information
There are a number of different types of users of financial information:
- Shareholders: Shareholders want to know how effectively the directors are performing their stewardship function, and will use financial information as the basis of decsions to buy or sell shares.
- The loan-creditor group (existing and potential debenture and loan stock holders, and providers of short-term funds): The loan-creditor group want to ensure that interest payments will be made promptly and that capital repayments will be made as agreed. Debentute and loan stock holders will want to know how easily they may dispose of their debenture or loan stocks should they so wish.
- Employee groups (existing, past and potential employees of the organisation, along with trade unions whose employees are members of the organisation): Past employees will primarily be concerned with the security of their pensions. Present employees will be concerned with whether the company can keep operating, continue to pay acceptable wages and maintain pensions. They may also want to ensure they are getting fair compensation for profits accruing as a result of their efforts. Potential employees may be trying to decide if the company is worth working for. Trade unions may use financial statements in wage and pension negatiations.
- Bankers: If a bank has not given a loan or overdraft to an organisation then it will have no great need to see the financial statements. If money is owed to a bank then that bank will want to ensure payments of interest will be made when due and that loans/overdraft will be repaid at the correct time.
- The business-contact group (trade creditors, suppliers, customers, business rivals, potential takeover bidders, and those interested in a merger): Trade creditors and suppliers will want to know if they will continue to be paid, and/or the prospects for future profitable association with the organisation. Customers want to know if a company is a secure source of supply. Business rivals will want to assess the comparative position. Potential takeover bidders and those interested in a merger would want to assess the desirability of such a move.
- The analyst/advisor group: This group will need information for their client or readers. Financial journalists need information for readers. Stockbrokers need information to advise investors. Credit agencies want information so they can advise present and possible suppliers to the company of its creditworthiness.
- Inland Revenue: Need financial statements to assess the tax payable.
- Other official agencies: Organisations concerned with supervision of industry and commerce may need the information for their purposes.
- Management: Vitally concerned with published (as opposed to internal) financial statements and the effects they may have.
- The public: Various groups with varying needs e.g. ratepayers, taxpayers, political parties, pressure groups and consumers.