USES AND USERS OF USES AND USERS OF INFORMATIONINFORMATION

Learning IntentionsLearning Intentions

Know the purpose of analysing Know the purpose of analysing financial informationfinancial information Controlling costs and expenditureControlling costs and expenditure Forecasting trends and future planningForecasting trends and future planning Monitoring performanceMonitoring performance

Know the main users of financial Know the main users of financial informationinformation Owners, managers, shareholders, creditors, Owners, managers, shareholders, creditors,

employees, government, citizensemployees, government, citizens

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Controlling Costs and Expenditure

The Trading profit and loss account and gross profit and net profit ratios can be used to highlight spiralling costs.

• Is the telephone bill too big?

• Are electricity costs increasing?

• Have production costs risen?

•Are profits good enough to give workers a BONUS?

•Is the Gross Profit Percentage too low?

•Should/can prices be raised?

USE OF FINANCIAL INFORMATION (1)

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Managers can plan for the future by using CASH FLOW

For example

If the minimum wage rises will you need an overdraft to pay workers?

Will updating the equipment require a loan from the bank?

USE OF FINANCIAL INFORMATION (2)

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Monitoring Performance

•Comparing final accounts and their ratios with previous years.

•Comparing final accounts and their ratios with similar businesses.

•Figures can reveal whether the business is achieving its targets. If not, then action can be taken.

USE OF FINANCIAL INFORMATION (3)

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USERS

OF

FINANCIAL

INFORMATION

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Different people use information for

different purposes

Owners of a business

•To help make better informed decisions in the future.

•To control costs

Other managers

•To work more efficiently within budgets etc.

•Work out profitability of departments.

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SHAREHOLDERS

To check how well their investment is doing. This could affect their dividend rates.

OWNERS

To find out profits and compare with previous years. This aids decision-making.

To check that there is sufficient cash to meet debts etc.

CREDITORS

To check that the firm will be able to pay its debt to them.

To look for trends of stability.

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EMPLOYEES

To feel secure in the knowledge that their job is safe.

To see if a wage rise is possible.

To see whether a bonus will be paid or not.

GOVERNMENT

The Inland Revenue receive tax from companies.

CITIZENS

Will the business provide jobs for the community?

The local authority might need this information to estimate if more housing/schools may be needed.