Who are the users of Financial Statements?

Users of Financial Statements are:

• Investors: Shareholders or proprietors of the business are interested in knowing the financial position, earning capacity and growth prospects of the business.
• Potential Investors:- are also interested in knowing the financial position, earning capacity and its prospects for growth of the business. They are also interested in knowing how safe their investments will be.
• Lenders:- to the business like debenture-holders, supplier’s of loan and leases are interested in knowing the short-term as well as long-term solvency position of the entity. They aer interested in assessing the long-term solvency to ascertain whether the entity will be able to pay the debenture/loan on maturity.
• Suppliers and Trade Creditors:- They are interested in knowing about the solvency of the business, i.e., the ability of the enterprise to meet its debts when the fall due.
• Government and their Agencies:- Government and their agencies need financial information to regulate the activities of the enterprise, determine taxation policy, complication of national income statistics etc.
• Public:- Enterprises affect the public in a variety of ways. For Example, the activities of an enterprise largely influence the local economy. So the public at large is interested in knowing the progress of an enterprise which they may understand from the financial statement.
• Tax Authorities:- More particularly, income-tax authorities are interested in knowing the profit of the business so that income-tax can be imposed thereon.
• Stock Exchange:- Is an institution which facilitates dealings of sale and purchase of shares and debentures of companies. It gives information about companies to their members who take interest in financial statements because they provided useful financial information about companies.
• Employees and Trade Unions:- Are entitled to bonus which depends on the profit earned: they are thus interested in knowing the profit earned or loss suffered by the business.