Stakeholders' and Financial Statements
Stakeholders’ and Financial Statements
Carol Watts
Intermediate Accounting I
ACC305
In today’s day and age there is no easy way of telling which companies are doing well and which are almost down in the dumps. Banks, lending facilities, and/or external stakeholders are greatly interested in seeing where companies are in the market compared to their competitors. These companies take the most risk by investing their monies into entities that are not started, maintained, or organized by themselves. There are many factors that come into play when external stakeholders are looking to make a decision on where to place their money. Those factors include, but are not limited to, the items being sold or produced, the message the company has to offer, etc. Most importantly external stakeholders use financial information to make decisions on whether the company is profitable, has too much debt, etc. “The information provided by the financial statements help support their decisions and actions for the company.” (Baskerville, May 2011) Basically banks, lending facilities, and/or stakeholders need to know where a company stands in the market and in profitability. The best way for them to conclude that is by looking at companies’ Financial Statements, financial reports, and with the use of financial ratios.
Before getting into detail on financial reporting and what that entails it is essential to understand who exactly those external stakeholders are. External stakeholders are composed of investors, lenders, suppliers, customers, Government agencies, competitors, labor unions, supporters and opponents, just to name a few. These are essentially people and/or companies that may have interest in what goes on with known businesses or companies. Stakeholder’s main interest are profit growth and dividends because their goal is to get a return on the money they have invested. “Investors are stakeholders that buy shares in a company.” (Baskerville, May
Carol Watts
Intermediate Accounting I
ACC305
In today’s day and age there is no easy way of telling which companies are doing well and which are almost down in the dumps. Banks, lending facilities, and/or external stakeholders are greatly interested in seeing where companies are in the market compared to their competitors. These companies take the most risk by investing their monies into entities that are not started, maintained, or organized by themselves. There are many factors that come into play when external stakeholders are looking to make a decision on where to place their money. Those factors include, but are not limited to, the items being sold or produced, the message the company has to offer, etc. Most importantly external stakeholders use financial information to make decisions on whether the company is profitable, has too much debt, etc. “The information provided by the financial statements help support their decisions and actions for the company.” (Baskerville, May 2011) Basically banks, lending facilities, and/or stakeholders need to know where a company stands in the market and in profitability. The best way for them to conclude that is by looking at companies’ Financial Statements, financial reports, and with the use of financial ratios.
Before getting into detail on financial reporting and what that entails it is essential to understand who exactly those external stakeholders are. External stakeholders are composed of investors, lenders, suppliers, customers, Government agencies, competitors, labor unions, supporters and opponents, just to name a few. These are essentially people and/or companies that may have interest in what goes on with known businesses or companies. Stakeholder’s main interest are profit growth and dividends because their goal is to get a return on the money they have invested. “Investors are stakeholders that buy shares in a company.” (Baskerville, May
References: Accounting, NowMaster; Baskerville, Peter. Who are the stakeholders that use financial? Statements?: Stakeholders who use financial statements – Practicing level (Internet). Version 27. Basic Accounting concepts. 2010 Dec 18 (revised 2011 May 20). Retrieved from: https://knol.google.com/k/nowmaster-accounting/who-are-the-stakeholders-that use/y2cary3n6mng/53. Accounting, NowMaster; Baskerville, Peter. How do you read and understand a Balance Sheet?: Reading and understanding a Balance Sheet AKA Statement of Financial Position - Practicing level [Internet]. Version 13. Basic accounting concepts. 2010 Dec 6 [revised 2011 May 20]. Available from: http://knol.google.com/k/nowmaster-accounting/how-do-you-read-and-understand-a/y2cary3n6mng/46. eHow. (n.d.). The Importance of Stakeholders. Retrieved from http://www.ehow.com/info_8704286_importance-stakeholders.html eHow. Thomason, Kirk (n.d.). How a cash flow statement can be used for Investment Decisions. Retrieved from http://www.ehow.com/info_8704286_importance-stakeholders.html Gallagher, Scott (2004) Gallagher on Financial Ratio Analysis. Retrieved from http://educ.jmu.edu/~gallagsr/ratioforman.pdf