STAKEHOLDER

A stakeholder is an individual or group that has an interest in any decision or

activity of an organisation and the outcomes of its actions. Stakeholders can be
internal or external to an organisation

STAKEHOLDERS

INTERNAL EXTERNAL

OWNERSHIP EMPLOYMENT INVESTMENT SUPPLIERS CREDITORS GOVERNMENT

Internal stakeholders
Individuals and parties within the organisation. They are highly affected by the
decisions, performance, profitability and other activities of the organisation.

• Employees
The group of people who work for the company and are aware of internal
matters of the entity.

• Owners
The individual or group who owns the organisation; partners, shareholders
etc.
 • Investors
The individual or group who invest their money in the organisation.

External stakeholders
Parties or groups who are not a part of the management but they are indirectly
affected by company activities.

• Suppliers
Provide inputs to the organisation like raw material, equipment etc. They
sell goods and/or services to a business and rely on it for revenue generation
and on-going income.

• Creditors
Individual, bank or financial institution to provides funds to the
organisation.

• Government
Governments can be considered as one of the major stakeholders in
business. A firm is guided and controlled by government rules and regulations,
as they collect taxes from the company as well as from all the people it
employs and from other spending the company incurs.
Financial statements
Provides organisations financial health at a particular point in time, giving
insight into its performance, operations, cash flow and overall conditions.
Financial statements are essential since they provide information about the
company’s revenue, expanses, profitability, debt load and the ability to meet
its short-term and long-term financial obligations.

Stakeholders and Financial statements

• Investors
Investors are interested in their potential profits and the security of their
investment. The security of the investment will be revealed by the financial
strength and the solvency of the company as shown in the statement of
financial position.

• Employees
Need to know if an employer can offer secure employment and possible
pay rises. Financial statements helps increase the level of employee
involvement in and understanding of the business.

• Government
Need to know how the economy is performing in order to plan financial and
industrial policies. The tax authorities also use financial statements as a basis
for assessing the amount of tax payable by a business. Government would
request the financial statements in order to determine whether the company
is paying the right amount of taxes and relevant laws are being adhered to.

• Suppliers
Need to know if they will be paid. New suppliers may also require
reassurance about the financial health of a business before agreeing to supply
goods. Require financial statements in order to decide whether it is safe to
extend credit to a company.
 • Customers
Need to know that a company can continue to supply them into the future.
This is especially true if the customer is dependent on a company for specialise
supplies. When a customer is considering which supplier to select for a major
contract, it wants to review their financial statements first, in order to judge
the financial ability of a supplier to remain in business long enough to provide
the goods or services mandated in the contract.

• Creditors
Need to know if they will be repaid. This will depend on the solvency of the
company, which should be revealed in the financial statements. Requires
financial statements in order to estimate the ability of a borrower to payback
all loan funds and related interest charges.