Financial Information & Reporting

Financial information includes the summary, analysis and reporting of financial transactions pertaining to a business. This involves the preparation of financial statements available for public consumption.

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The objective of financial information, reported in the form of Financial Statements, is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions (IASB Framework).

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Financial information found within Financial Statements provide useful information to a wide range of users:

Financial Institutions (e.g. banks) use information 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.

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

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

Suppliers need Financial Statements to assess the credit worthiness of a business and ascertain whether to supply goods on credit. Suppliers need to know if they will be repaid. Terms of credit are often set according to the assessment of their customers' financial health.

Governments require financial information in the form of Financial Statements to determine the correctness of tax declared in the tax returns. Governments also keep track of economic progress through analysis of Financial Statements of businesses from different sectors of the economy.

For instance, fluctuating profits indicate higher risk. Therefore, Financial Statements provide a basis for the investment decisions of potential investors.

Governments require financial information in the form of Financial Statements to determine the correctness of tax declared in the tax returns. Governments also keep track of economic progress through analysis of Financial Statements of businesses from different sectors of the economy.

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 dependent on a supplier for a specialized component.

Employees use Financial Statements for assessing the company's profitability and its consequence on their future remuneration and job security.

Competitors compare their performance with rival companies to learn and develop strategies to improve their competitiveness.

General Public may be interested in the effects of a company on the economy, environment and the local community.

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also see

Accounting

Financial Statements