Uses of Financial Reports 12.15.2015 | by scaaadmin

Financial statements may be used by different stakeholders for a multitude of purposes.

Owners and managers use financial statements to make important long-term business decisions. For example: whether or not to continue or discontinue part of its business, to make or purchase certain materials, or to acquire or rent/lease certain equipment in the production of its goods.

Prospective investors use financial statements to perform financial analysis, which is a key component in making investment decisions.

A lending institution will examine the financial health of a person or organization and use the financial statement to decide whether or not to lend funds.

Employees need these reports in the case of labor unions or for individuals in discussing their compensation, promotion, and rankings.

Philanthropies may use financial statements of a non-profit as a component in determining where to donate funds.

Vendors who extend credit to a business require financial statements to assess the creditworthiness of the business.

Government entities (tax authorities) need financial statements financial reports to stay accountable to the public and people. The rules for recording, measurement and presentation of government financial statements may be different from those required for business and even for non-profit organizations. The requirements for non-profit financial statements differ from those of a for-profit.

Source: Boundless. “Uses of the Financial Statement.” Boundless Finance. Boundless, 21 Jul. 2015. Retrieved 15 Dec. 2015 from https://www.boundless.com/finance/textbooks/boundless-finance-textbook/financial-statements-taxes-and-cash-flow-2/introducing-financial-statements-31/uses-of-the-financial-statement-177-1000/