Economics Title

Users of Financial Information

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Content Contributors

Learning Objectives

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Investors and Shareholders
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Investors/ Shareholders require information to assess the following: - Profitability of businesses they invest in; 

  • How efficiently resources are used in the business; 

  • Return of their investment compared to other investments and the value (dividends); 

  • The risk of their investment.

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Lenders
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Lenders include: banks, suppliers, creditors such as debenture holders. Lenders want to asses the 

ability of the business to pay debts owing as and when they fall due. 


They assess: 

  • Profitability to the extent that the business has the future ability to repay debts. 

  • Liquidity - does the business have sufficient liquid assets to pay back debts when they are due. - 

  • Risk - the level of the business's existing debt to equity financing is considered. Does the business's profitability support regular interest payment?

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Employees
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Employees want information to assess their job security and whether they are being paid fairly. They asses: 

  • Profitability - poor profitability could mean they are at risk of losing their jobs. 

  • Liquidity - can the business meet their wages and salary obligations on time.

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Financial Analysts
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Investors rely rely on the advice provided by financial analysts. Analysts are employed in many different organisations such as: superannuation funds, investment banks, stockbroking firms and large companies. 


Analysts have interests in a wide range of the business's information similar to investors, including: profitability, growth potential, return on investments, risk and liquidity.

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Auditors
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Frequent analysis of the financial reports of a business help with carrying out an effective audit. 


Auditors are interested in: 

  • Trends in sales, profits and costs. 

  • Significant variations from regular patterns. 

  • Compliance with accounting requirements.

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Managers
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Managers have access to a variety of internal financial information prepared: budgets, costing reports etc. Managers are responsible and therefore have an interest in the profitability, growth potential, level of risk, liquidity and management efficiency.

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