Premium Essay

Users of Financial Info

In: Other Topics

Submitted By Leema10
Words 531
Pages 3
------------------------------------------------- Users of Financial Information

Managers
Managers require Financial Statements to manage the affairs of the company by assessing its financial performance and position and taking important business decisions.

Shareholders
Shareholders use Financial Statements to assess the risk and return of their investment in the company and take investment decisions based on their analysis.

Investors
Prospective Investors need Financial Statements to assess the viability of investing in a company. Investors may predict future dividends based on the profits disclosed in the Financial Statements. Furthermore, risks associated with the investment may be gauged from the Financial Statements. For instance, fluctuating profits indicate higher risk. Therefore, Financial Statements provide a basis for the investment decisions of potential investors.

Financial Institutions
Financial Institutions (e.g. banks) use Financial Statements to decide whether to grant a loan or credit to a business. Financial institutions assess the financial health of a business to determine the probability of a bad loan. Any decision to lend must be supported by a sufficient asset base and liquidity. Suppliers need Financial Statements to assess the credit worthiness of a business and ascertain whether to supply goods on credit. Suppliers
Suppliers need to know if they will be repaid. Terms of credit are set according to the assessment of their customers' financial health. Customers use Financial Statements to assess whether a supplier has the resources to ensure the steady supply of goods in the future. This is especially vital where a customer is dependant on a supplier for a specialized component.

Employees
Employees use Financial Statements for assessing the company's

Similar Documents

Premium Essay

Notes

...Lesson 1 Chapter 1 LIFA 1.1 WHAT IS ACCOUNTING? · Accounting- an information system that identifies, measures, records and communicates understandable, relevant, reliable, and comparable information about an organization’s economic activities. · Recordkeeping, or bookkeeping, is the recording of financial transactions, either manually or electronically, for the purpose of creating a reliable bank of data · Primary objective of accounting- to provide useful info for decision-making · Accounting info results from the accounting activities of identifying, measuring, recording, reporting, and analyzing economic transactions. 1. What is the major objective of accounting? · Accounting is an information and measurement system that identifies, measures, records, and communicates understandable, relevant, reliable, and comparable information to people that helps them in making better decisions. It helps people in business to identify and react to investment opportunities, and better assess opportunities, products, investments, and social[->0] and community responsibilities. 2. Distinguish between accounting and recordkeeping. · Recordkeeping is the recording of financial transactions and events, either manually or electronically. While recordkeeping is essential to data reliability, accounting is this and much more. Accounting includes identifying, measuring, recording, reporting, and analyzing economic events and transactions. It involves interpreting information, and designing...

Words: 5455 - Pages: 22

Premium Essay

Bp Study Guide

...ACG 3401 Study Guide Exam 1 Accountants Roles * Management accountant * Internal auditor * Information systems auditor * External auitor * Tax accountant * Fraud examiner * Managerial Accountant * Provides info for mngmt decisions * Knowledge base: * * * * Business processes * Accounting information sustems * Internal controls * Managerial accouting techniques * Impact of accounting on behaviors Advocate for best info possible for making the best decision for the firm IMA Information criteria: 1. 2. 3. 4. Forward looking 5. Timely 6. Responsibility oriented Planning Systems (budgets) control systems (implement the course of action and evaluate) Management accounting answers questions related to : * * * * * Important customers ( profitability) * Substitute products * Critical capability * Funding ( growth) Value ( Adam Smith) * Value in use- derive value by using the product * Value in exchange- derive value from the exchange of that product for another good or service. Generic Value Chain Model: 1. 2. 3. 4. *Customer need identitified* 5. Identify the market and create the product/ service ( innovation cycle) 6. Build the product or service and deliver the product or service ( operations cycle) 7. Service the customer ( post sales service cycle) ...

Words: 2656 - Pages: 11

Free Essay

Management Information Systems

...Find more on www.studymaterial.ca ADMS 2511 MIS Notes Ch 1 – Modern Organization in the Global, Web-Based Environment Management information systems (MIS)- deals with the planning of info tech to help people perform tasks related to info processing and management Information technology (IT)- any computer-based tool used with info to support the needs of an org Importance of Planning for IT -a new info system can apply to the whole org, or a specific area of the org Application portfolios- are groups of new system proposals (apps that have to be added/modified) IT Planning -begins with an organizational strategic plan -states  the  firm’s  mission,  goals,  and  steps  to  reach  those  goals -IT architecture describes  the  way  an  org’s  info  resources  should  be  used  to  accomplish  its  mission -includes both technical (hardware operating systems) and managerial aspects (managing the IT dpt, how area managers will be involved) IT strategic plan- LT goals that describe the IT infrastructure and major IT initiatives to achieve the organization’s  goals -it must meet three main objectives: -must  be  aligned  with  the  org’s  strategic  plan -must provide for an IT architecture that networks users, apps, and databases -must efficiently allocate IS resources among different projects so they can all be completed on time, within budget, and function properly IT steering committee- composed of managers/staff who rep diff organizational units -they  establish  IT  priorities...

Words: 24496 - Pages: 98

Free Essay

Chapter 1 Notes

...or services o Conversion cycle = transforming resources acquired into goods and services o Revenue cycle = providing goods or services to customers and collecting cash • Management Information System (MIS): system that captures data about an organization, stores and maintains the data, and provides meaningful info for management • Accounting Information System (AIS) is a subset of an MIS • Data captured by the MIS are aggregated, summarized, and organized to produce information that helps an organization monitor and control business processes Scope of an Accounting Information System • AIS provides accounting and financial information, and other information obtained in the routine processing of accounting transactions • It tracks info about sales order, sales in units and dollars, cash collections, etc. • Enterprise Resource Planning System (ERP): business management system that integrates all aspects of a firm’s business process Uses of AIS • Producing External Reports o These reports satisfy the needs of investors, creditors, tax collectors, etc. o Includes financial statements, tax returns, and reports required by agencies • Supporting Routine Activities o Ex. taking customer orders, delivering goods/services, billing customers, etc. o Computer systems can handle repetitive transactions • Decision Support...

Words: 618 - Pages: 3

Premium Essay

Research

...when it needs to access external resources such as a printer or the network. *A technology subject doesn’t have a username & password the way a human subject might, but it does have the same authorized, unauthorized, or unknown status. P.6 2) A well-defined access ctrl system consists of 3 elements: *Policies- Rules developed by someone with a strong knowledge of the organization, its assets, goals & challenges. *Procedures- Nontechnical methods used to enforce policies. *Tools- Technical methods used to enforce policies. *Organizations typically use procedures & tools together to enforce policies. P.5 3) The purpose of access ctrl is to regulate interactions between a subject which is usually, but not always, a human user, and an object such as data, a network, or device. The key difference between the subject and the object is passivity: the subject acts upon a passive object. There are 3 key components of access ctrl: identification, authentication, & authorization. P.16 4) Confidence in any authentication system can be measured by 2 components: the type...

Words: 2358 - Pages: 10

Premium Essay

Principle Accounting, and Recognition and Measurement Issues

...DEFENCE OF HISTORICAL COST ACCOUNTING i. Historical cost is relevant in making economic decisions. * Ijiri present 3 reasons historical cost is relevant for making decision * It effect the evaluation n selection of decision rules. It used the past info to measures the quality of their past decisions. * Provides input for satisficing notion where some managers make decisions that will support expected or satisfactory outcome. They are consider how much has already earned rather than how much mote they can earn. * It is used bcoz it imposed on decision makers by their environment. Eg: taxation decision n cost plus contract. ii. Historical cost is based on actual, not merely possible transaction. * Record done based on actual transactions made. * Ijiri- it possible to prepared a balance she on the basis of year-end market price without references to actual transactions. * Historical cost provides evidences for determining how efficiency management has meet their responsibilities. iii. Through history, FS based on historical cost have been found to be useful. * Mautz – “if whose who make management n investment decision had found financial reports based on historical cost useful over the years, changes in acctg would long since have been mad” iv. The best understood concept of profit is the access of selling price over historical cost. * People understand the basic notion of actual cost compared to...

Words: 3307 - Pages: 14

Premium Essay

Harmonization of Ifrs (Aasb 107)

...Accounting standards are the product of modernization which initially becomes the rules and regulations to govern the way in preparing financial statements. In these days, International Financial Reporting Standards (IFRS) are widely implemented, yet the underlying accounting practices are still unstandardized due to various factors of economic and cultural differences, just to name a few. In 2010, proposals were issued in Australia and New Zealand which aim to harmonize the standards as adopted in both countries (KPMG, 2010). The purpose of this paper is to study whether the given option of using the indirect method in reporting cash flow statement is beneficial to the users of general purpose financial reports. The paper is divided into five parts where it started off with a brief introduction of AASB 107, following by the reasons for harmonization, the arguments for and against the (in)direct method as well as some criticisms before moving into conclusion. Cash flow is vital to determine the potential of profitable firms as most firms under the basis of accrual accounting may still present favorable profits, despite having poor cash management. The objective of AASB 107 is to require the provision of information about the historical changes in cash and cash equivalents of an entity by means of cash flow statement (Australian Accounting Standards Board [AASB], 2013). In this paper, focus is concentrated in reporting cash flow from operating activities using either the direct...

Words: 1489 - Pages: 6

Premium Essay

Terms

...1. Record a journal entry 2. Summarize in the ledfer 3. Prepare a trial balnce. 4. Adjust the accounts 5. Prepare financial statements. 6. Close the books. * Contributed Capital and Retained Earnings are part of stockholders’ equity, * Cash, land, equipment, and buildings are all called assets * When a company pays its supplier for amounts owed, the Cash and the Accounts payable accounts are decreased. * MMM Pizza bought 1500 dollars of cookware on account. What is the effect of recording transaction on the company’s total assets? Total assets will increase. * The primary users of external financial statements are creditors, who use accounting info to administer business contracts and investors, who use accounting info to value the business. * The primary objective of external reporting is to provide useful economic info about a business to help external parties make sound financial decisiosn. * Which of the following items are found on a chart of accounts? Account numbers and account titles. * CC results from the financial activities that took place when owenrs invested in the business. * Total liabilities will increase when a company buys a building in exchange for a 20 year note payable. * The unite of measure assumption requires a US company to report its financial results in US dollars. * When it comes to transaxtion analysis, every transaction affects at least two accounts, and the accounting...

Words: 579 - Pages: 3

Premium Essay

Accounting 200 Exam

...Accounting 200 Review for Exam 1 Chapter 1: 1. Forms of Business Organizations: a. Sole Proprietorship i. Business owned by a single person ii. Ex. If you want to start a business without outside investors b. Partnership iii. Business owned by two or more persons iv. Ex. If you want to start a business with a friend you can form a partnership c. Corporation v. Completely different from proprietorship or partnership vi. Entity that is legally separate from its owners and involves outside investors in the business through issuance of shares vii. External funding is raised when individuals purchase shares of ownership 1. Typically referred to as common stock 2. Each share of stock represents a unit of ownership 2. What information would a company’s investors and creditors be interested in knowing to make informed decisions? d. Investors and creditors want to know about the company’s resources and their claims to those resources 3. Basic Accounting Equation e. Assets = Liabilities + Stockholders’ Equity f. Assets viii. Resources owned by the company ix. Land, building, equipment, cash, inventory, etc. g. 2 parties of the company claim the resources x. Creditors xi. Investors h. Liabilities xii. Amounts owned to creditors xiii. Ex. Amounts owed to bank, suppliers...

Words: 1378 - Pages: 6

Premium Essay

Management Information System

...Ch.6 Telecommunications, the internet and wireless technologies Components of a simple network: • NIC (Network Interface Card): to incorporate any laptop to an existing network. • NOS (Network Operating System): to share network resources & route communications on a LAN. • Hubs & switches help route traffic on a network to the right computing device. • Router: when 2 or more networks are connected to each other, it sends data transmissions to the correct device from the internet. Digital Networking Technologies: 3 types, 1. Client/server computing: servers connect to many clients. 2. Packet switching: method of delivering data across a local or a long distance connection, it packages data in units (packets) which identifies intended recipient. 3. TCP(Transmission Control Protocol)/IP(Internet Protocol): a set of protocols to get data from one network device to another. Signal is the transmission of data. Analog signals can be converted into digital signals by using a modem. Analog signals are replicas of sound waves that can be distorted with the noise and drop the quality of transmission. Digital signals have a faster rate of transmission. LAN (Local Area Network): the topology (place) of a LAN can vary greatly, - Star: if the host computer goes down the whole network goes down. - Bus: all computers in the network are linked with cables and treated equally. - Ring: no central host PC, if one PC goes down the rest can still process data & transactions. WAN...

Words: 2473 - Pages: 10

Premium Essay

Accounting Balance Sheet

...deliverytrucks,furniture,buildings,etc.(PPE).Resources owned by a business=assets.Investments another example of an investing activity. Income Stmt: Reports revs.&exp. for a specific period of time. Net income/loss. Past net income provides info for predicting future net income. Net income is needed to determine the ending balance in retained earnings. RE: stmt. shows amts and causes of changes in RE during the period. Time period is the same as that covered by the income stmt. Users can evaluate dividend payment practices. Ending balance in RE is needed in preparing the balance sheet. BS: Reports assets and claims to assets at a specific point in time. Assets=Liab+SE. Lists assets first, followed by Liab and SE. U.S. companies that are publicly traded must provide shareholders w annual report. Annual Report always includes: Financial stmts, mgmt. discussion&analysis, notes to financial stmt, auditor’s report. Mgmt discussionAnalysis: comp. ability to pay near-term obligations, ability to fund ops.&expansion, results of ops. Mgmt must highlight favorable or unfavorable trends & identify significant events and uncertainties that affect these three factors. International standards are referred to as International Financial Reporting Standards(IFRS) made by the International Accounting Standards Board(IASB). IFRS more...

Words: 1174 - Pages: 5

Premium Essay

Esanda Finance Group

...Esanda Finance Corporation Ltd v Peat Marwick Hungergords – indirect recipient of info • Facts: financier (Esanda) lent money to Excel in reliance on E’s audited accounts (Peat Marwick) and reports - could not recover money. Sued E’s auditors for alleged negligence. • Issue: whether auditors owe a duty of care to persons other than their clients who have relied on their unqualified reports in entering various financial transactions. • Held: Esanda appealing – appeal dismissed  auditors do not owe a duty of care to all users of their info (duty only extends to their clients). o Brennan J: o Mere foreseeability of the possibility that a statement made or advice given by A to B might be communicated to a class of which C is a member and that C might enter into some transaction and suffer subsequent financial loss is insufficient to impose on A a duty of care owed to C in the making of the statement or the giving of the advice. o Following Caparo Industries Plc v Dickman - But, in every case, it is necessary for the plaintiff to allege and prove that:  the D knew or ought reasonably to have known that the information or advice would be communicated to the P, either individually or as a member of an identified class,  that the information or advice would be so communicated for a purpose that would be very likely to lead the P to enter into a transaction of the kind that the P does enter into  and that it would be very likely that the P would enter into such a transaction...

Words: 543 - Pages: 3

Premium Essay

Nt1330 Unit 3 Assignment 1

...shopper and search the corresponding files within the info. Finally, notice that file and send to the shopper. If the server finds the entrant means that, it set the choice Path to those entrant. 5.2. System Module 5.2.1 User: Users, WHO have information to be hold on within the cloud and have confidence the cloud for information computation, contains each individual customers and organizations. 5.2.2 Cloud Service supplier (CSP): A CSP, WHO has vital resources and experience in building and managing distributed cloud storage servers, owns and operates live Cloud Computing systems. 5.2.3Third Party...

Words: 751 - Pages: 4

Premium Essay

Joint Venture in Russia

...company added its technological and marketing expertise.The new CEO declared that ABB would be “global and local, big and small, radically decentralized but with central control.” To achieve these seemingly competing objectives, ABB’s CEO chose to implement matrix management. Matrix Management Matrix management is an organizational structure that combines two levels of oversight and control. In ABB’s case in 1993, the company was divided into four corporate divisions (Global dimensions) at the same time as it was divided into three geographic regions (Regional dimensions).The Global dimensions were further partitioned into business areas and the Regional dimensions were partitioned into country holdings. See the nearby figure from Germany’s INFO Institut.Thus, employees reported to two superiors, one from their Global Dimension and one from the Regional dimension. Global dimensions were responsible for strategy, distribution, and R&D, whereas Regional dimensions were responsible for sales and local customer satisfaction.To accomplish the objective to be both “global and local,” ABB’s matrix management pursued global integration and local responsiveness. Management sought to globally optimize through economies of scale and to differentiate products based on local markets.ABB would be “big” in...

Words: 1305 - Pages: 6

Premium Essay

Accounting Midsem

...acct 1511 notes Chapter 6 – Financial Reporting Principles, Accounting Standards and Auditing 6.2 Accounting Principles and the use of Accounting Information   Doing accounting takes expert knowledge, considerable experience and continuous attention to new problems and solutions. Concepts and principles are important, as they form logical structure that practising accountants use every day to consider problems to make recommendations GAAP (Generally Accepted Accounting Principles) applied differently for different entities Rules, standards and usual practices that companies are expected to follow when preparing financial statements Stock market crash of 1929 brought GAAP AASB (Aust Accounting Standards Board) IASB (International Accounting Standards Board) AASB uses IASB as foundation, but includes more details applicable to Aust environment SACS – Statement of Accounting concepts SAVS established for general concepts and principles to be used in preparing financial statements SAC 1 – Definition of a Reporting Entity SAC 2 – Objective of General Purpose Financial Reporting SAC 3 – Qualitative Characteristics of Financial Information SAC 4 – Definition and Recognition of the Elements of Financial Statements Now, SAC 3 and SAC 4 is replaced with “Framework for Preparation and Presentation of Financial Statements”              FYI: Difficulties that face accounting and managers by GAAP   Difference in company structures – e.g. ABC = not for profit, publicly...

Words: 3857 - Pages: 16