UTILITY OF THE FINANCIAL STATEMENTS - Accounts and Finance for Managers

Utility of Financial Statement

The financial statements are found to be more useful to many people immediately after presentation only in order to study the financial status of the enterprise in the angle of their own objectives.

To Management

The financial statements are most inevitable for the management to take rational decisions to maintain the sustainability in the business environment among the other competitors.

To Shareholders, Security Analysts and Investors

The information extracted from the financial statements are processed by the above mentioned people to identify not only the financial status but also to determine the qualities of getting appropriate rate of return out of the prospective investment.

To Lenders

The lenders do study about the business enterprise through the available information of its financial statements normally before lending. The aim of the study is to analyse the status of the firm for the worthiness of lending with reference to the payment of interest periodicals and the repayment of the principal.

To Suppliers

The suppliers are in need of information about the business fleeces before sale of goods on credit. The Suppliers are very cautious in supplying the goods to the business houses based on the various capacities of themselves. The most important capacity required as well as expected from the buyer firms is that prompt repayment of dues of the credit purchase from the suppliers. This quality of prompt payment could be known through culling out the information from the balance sheet.
It mainly plays pivotal role in answering the status inquiries about the buyer

To Customers

The legal relationship of the transferability of ownership of the products is obviously understood through financial information available in the statements. The agreement of warranty and guarantee is tested through the financial status of the enterprise.

To Govt., and Regulatory Authorities

The taxes to be paid to the central and state govts on the revenues only through presentation of information.

To Promote Research and Development

For research and development, the amount of investment required is voluminous, which has to be mobilized from either internally or externally to the requirement of the future prospects of the enterprise.

The following questions should be answered one after the another in meeting raising needs of the research and development

  • How much to be raised?
  • When the required amount to be raised?
  • How to raise the required resources?

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