Importance of Financial Information to Stakeholders

In business there are two types of stakeholders that’s: internal stakeholders and external stakeholders. Internal stakeholders mean those stakeholders are dwell inside the company for examples: managers, employees, board members etc. On the other hand those stakeholders are not directly a part of a company is called external stakeholders for examples: shareholders, customers, suppliers etc. All shareholders want to see the use of their investment and thus asses the management through the financial statements. Because financial statements are very useful for businesses.

Stakeholders of the company require the financial information for following reasons.

  • To know how well the company is doing.
  • To find company has earned more money than they spent.
  • To get an idea about strategic and tactical plans of the management.
  • To provide information to make decisions who make decisions about organisatoin.
  • Avoid dissimulations and corruptions of the organisation.

The usefulness of financial statements to different stakeholders is given below that’s are:

Directors and Managers

  • About new investment and project appreciation decision.
  • About continued and discontinued operations.
  • Dividend decisions.
  • Diversified business decision.
  • Winding up decision.
  • To establish overall objectives and periodical targets.
  • To avoid dissimulations and corruptions.
  • To establish squired systems and strengthens control of procedures.
  • To increase the productivity level of the organisation.

Shareholders

  • To determine whether their investment will be sold, halt or bought more shares of the organization.
  • To decided the fairness of the returned for their investments.
  • To determine the going concern of the organisation.
  • To obtain wide knowledge about the organizational activities.
  • To compare their investments and their benefits with other competitive organizations and industries.

Employees

  • To know about the stability and profitability of the employer.
  • To know about remuneration, retirement benefits, and employment opportunities are in organisation
  • To ensure the job security with the current employer.
  • To ensure the fairness of the salaries and wages they obtain from the organization according to their earnings.
  • To have a clear view about other operations of the organisation.

Suppliers

  • To ensure their payments of supplies will be received on due.
  • To ensure the stability of their customers.
  • To have knowledge about other products and their suppliers of the organisation.
  • To compare their transaction with existing and other companies
  • To find other competitive suppliers and their contribution towards the organisation.
  • To find opportunities to supply more.

Government

  • To collect accurate taxes and amounts from organizations on due dates.
  • To provide government benefaction to improve their business.
  • To obtain financial and non-financial assistance for government development projects.
  • To ensure the organizations oversee their employees in reasonable way.
  • To ensure the organizations compliance with government rules, regulations and acts that established by the government.

Consumers

  • To have knowledge about the cost structure of the products that the organisation is producing.
  • To ensure the stability of the organisation.
  • To know about the organization’s profitability, because profitability is a shed light to know about products impossible growth, improvements, best customer service and low price strategic implications.
  • To know about CSR programs conducted by the organisation.

Public

  • To conscious about organization’s substantial contribution towards the society.
  • To know about the opportunities to link with the organisation.
  • To know about CSR contribution towards the country.
  • To conscious their activities which can be affected to interest of the nature and the country.

Financial accounting is concerned with financial transaction and statements that have already taken place. It is a gathering of information about business transactions. For example: profit and loss. These processes are controlled by finance manager. On the other hand management accounting is concerned with providing management of an organisation with recommendations based on accounting information, in order to help in making day to day decisions and in longer term planning. These processes are controlled by finance manager. Financial accounting and management accounting provide information into two different user groups. Financial accounting primarily provides information for external users of accounting data, such as investors and creditors. On the other hand, management accounting provides information for internal users of accounting data. Internal users include employees, managers, and executives of the company. Financial accounting is reporting on historical information. The information is reported regularly. It is often broken down into monthly, quarterly, and annual reporting periods. On the contrary, management accounting information is reported continually. Internal users need to evaluate past, present, and potential future information in order to make decisions. Therefore, these users continuously need information in order to make the appropriate decisions. These two accounts are very important for a business. Without these two businesses cannot run properly or cannot make profit. So always try to keep proper account of these two accounting sector.

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