Users of Financial Imformation

Financial accounting information is used by a variety of

groups and for diverse purpose

User groups may be broadly classified into two:

Those with direct interest or direct users.

2. Those with indirect interest or indirect users.

Direct Users

Among others, the groups directly interested in the financial activities of a business firm are:

1. Owners or stockholders they are interested to know

whether to maintain, increase, decrease or dispose of com-

pletely their investment, whether they are getting a fair

return on their investment.

2. Prospective owners or stockholders this group is inter

ested in the financial statements to determine whether to Commit their resources to the enterprise or
acquire an

ownership interest in the business firm.

3. Management (including officers and directors) To man

agement, the financial statements serve as a measure of

their effectiveness; the statements are also uised in mak

ing future financial decisions or assessing nature and

extent of financing needs.

4 Creditorshey use financial statements as a basis for

scertaining whether to grant loan or not. The amount

of loan, the terms and other matters will depend in large

part on the financial data submitted by the borrovwer.

5. Employees This group is interested in two things

security of employment and satisfactory compensation.

Financial information is necessary in making a decision

whether to continue working for the company or look for

workelsewhere.

6. Taxing authorities The Bureau of Internal Reven re-

qUireS financial data for proper computation or assess-

ment of taxes or penalties and for future investigation

and audit.

7 Customers This group requires financial data in order

to anticipate price changes and if necessary seek alterna-

tive rce of supply.

Indirect Users

Some users derive an interest because their function is to

assist or protect those who have or contemplate having a

direct interest. Examples are:

1. Regulatory or registration authorities - Some agencies like

SS1onne need financial

the Securities and Exchange Comm

statements in order to assess reasonableness of rate of re

turn, allow or require increase or decrease in prices or rates

and make important decisions affecting public interest

2. Lab union Financial information is necessary for

proper formulation of wage and contract demands, and

assessment of enterprise and industry prospects and

strength.

3. Stock exchanges-The Philippine Stock Exchange requires

statements for the purpose of accepting or canceling list.

ing of securities in the stock market.

The stock exchange also encourages changes in ac-

counting practices or additional disclosure of information.

4. Trade associations- This group will compile industry

statistics, make comparisons, and analyze industry re-

sults, so that entities belonging to the industry can make

relevant economic decisions.

5. Lawyers This group is consulted for the purpose of

determining whether contractual provisions are fulfilled.

This group also advises on the legality of dividends,

profit sharing agreement and pension plans.

6. Financial analyst and advisors- Financial statements

are required so as to properly advise investors and poten-

tial investors whether to retain, increase, decrease or

acquire an investment in the enterprise.

Financial press and reporting agencies- The statements

are gathered and collated for descriptive analysis and

computation of trends and ratios.