Owners and managers need financial statements so that they can run the business effectively and know where they can make improvements. They want to know if their business will be successful and make a profit.
Employees need to be sure if the business will be stable and that their jobs will be secure in the long run. They need to make sure that the business can always pay them their salaries.
Existing and potential investors need to know if their investments will be secure but also get the most out of their investment.
Lenders such as banks need to know that the business has the ability to repay their debts.
Government needs to know how much tax the business must pay or claim back, and they also need to know if the business is following regulations
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Owners also analyse these financial statements by using ratios to assess the performance of the business and this will indicate the areas where they can make improvements.
Employees look at the statement of profit or loss to see if the business has enough money to cover their salaries and they also analyse the financial statements to see if the business can continue paying them their salaries in the future.
Investors analyse the financial statements of a business and use ratios to assess the risk and returns of their investments. Potential investors compare these ratios to the financial ratios of other similar businesses.
Lenders look at financial statements to make decisions regarding the provision of loans and they also analyse the statement of financial position which indicates if the business has a good solvency.
The government looks at the profit of the business in the statement of profit or loss in order to calculate the tax due and they analyse reports to ensure all regulations that are set up by the business are