Question

who are the main users of financial statemeny for decision making?

Answer 1

SOLUTION:

The main users of financial statements for decision making are Company management, Investors, Government, owners, employees, lenders,suppliers,customers,auditors,tax authorities.Financial statements provide basis of information to all the users either internal users or external users for decision making purpose.

Company managment use the financial statement to plan,monitor the activities of the organisation for better decision making.In order to allocate resources in an effective and efficient manner,managment need to analyse the statements. For the basis of comparison against past performance,competitor analysis,indicators of key performance,management need to rely on financial statements.

Investors basically rely on the financial statements in order to know their how well their investment is performing.Investors decide to do more or less investment keeping in view the performance in financial statements.

Tax authorities-In order to determine the worth of the company,for the income tax purpose,Income tax authorities rely on financial information to cross check whether the tax deposited as per the financial statements or not.

Auditors-Auditors work starts with the financial statement and also end with it.ExternalAuditors analyse the financial statements to form the audit opinion.Investors also rely on the opinion of auditors on the accuracy.

Owners.Owners tends to know how risky their business is.Owners knows about the profitability of the business with the help of financial statements.By assessing financial statements,owners decided if they invest more or less in their business.

Lenders.Lenders are the essential components for any organisation,as every business has to take loan to run or perform better.Lender use the financial statements to assess the credit worthiness of the organisation,in order to know the ability to pay back loan.For a decision making purpose,Lenders decided to lend money to any organisation,keeping in view the profitability,liquidity etc.

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