Stakeholders who Uses Financial Statements

Wamukekhe Shedrine Butali

BSMF/186J/2019

6/5/2022
 Stakeholders who Uses Financial Statements

Financial statements that are unbiased, relevant and timely are often used by various
stakeholders to make sound financial decisions. In this context, stakeholders are individuals who rely on
financial statements information come up with viable decisions as they are normally concerned with
economic viability of the business or an organization (Franklin et al., 2018). They may include
stockholders, creditors, customers, governmental and regulatory agencies, management and other
employees.

1. Stockholders

Thise are owners of stock in business. They are termed as stakeholders as they receive ownership
interest in the business in exchange for cash (Franklin et al., 2018). They use financial information to
gauge the performance of the organization financially and decide whether or not to bring in more stock
or not, sell the available stock or maintain the current level of stock ownership.

2. Creditors and Lenders

Businesses purchases from other businesses to provide goods and services to their customers which may
come in form of materials that are used to make finished goods or resell, office equipment, machineries,
and utility services like heating and cooling that are beneficial to the efficiency and effectiveness of the
business. Payments are rarely demanded at the time of purchasing products hence many businesses opt
to for credit to other businesses. This form of payment means that the deal is closed after a certain
period of time following receipt of the goods or provision of services (Franklin et al., 2018). Both
creditors and lenders uses financial information to make decisions on whether or not the borrowers are
capable of paying the loans or goods sold on credit. They do this because lending and selling goods and
services on credit comes along with repayment risk. As much as historical financial performance of the
company does not guarantee the lenders and creditors that the debt will be repaid, established pattern
of financial performance with the use of historical accounting information is useful to creditors and
lenders to determine the capabilities of the borrowers to repay the funds and how much money to lend
ad the duration to lend the money for and how much interest to charge the owner (Franklin et al., 2018).

3. Government and Regulatory Agencies

They use financial information to accomplish the mission of protecting the public interest. The major
aims are to ensure that financial information is generated in accordance with applicable laws or
standards, and that funds are handled in an efficient and transparent way (Franklin et al., 2018). Local
school district administrators, for example, should guarantee that financial information is accessible to
people and presented objectively. Residents want to know that their tax resources are not being
squandered. Similarly, school district officials want to show that the funds are being used efficiently and
effectively. This contributes to a positive relationship with the community, which develops trust and
support for the educational system.

4. Customers

Customers are regarded the product's end users. Customers, whether deliberately or unwittingly, have
an interest in the financial performance of the company (Franklin et al., 2018). When the company is
financially successful, the consumers benefit. Profitable companies will continue to offer the items that
customers desire, maintain and enhance business buildings, employ community members, and engage in
a variety of other activities that contribute to a lively and prosperous community. Customers are also
businesses. In the case of the electronics shop, the company buys its items from other companies,
including the gadgets' makers (Franklin et al., 2018). Just as end-user consumers have a keen interest in
the financial success of the firm, business customers benefit from financially successful suppliers. A
financially successful supplier will assist guarantee that electronics are accessible for purchase and resale
to end-user customers, that investments in developing technologies are made, and that delivery and
customer service are improved. This, in turn, assists the retail electronics store in being cost competitive
while offering a diverse range of items to its clients.

5. Managers and Other Employees

Employees are keenly interested in the financial success of the companies for which they work.
Employees want to know that their employment are secure so that they may continue to be
compensated for their efforts. Furthermore, individuals bring value to the firm by accumulating years of
service, expanding their knowledge and abilities, and taking positions of higher responsibility (Franklin et
al., 2018). A financially successful firm may reward employees for their dedication to the organization
with bonuses and raises. Managers and others in the company are responsible for making day-to-day
and long-term (strategic) choices for the organization, in addition to promotional and compensation
considerations. Understanding financial data is critical for making sound organizational decisions.
Managers and others in the company are responsible for making day-to-day and long-term (strategic)
choices for the organization, in addition to promotional and compensation considerations (Franklin et al.,
2018). Understanding financial data is critical for making sound organizational decisions.
 Reference

Franklin, M., Graybeal, P., & Dixon Cooper. (2018, July 24). Explain Why Accounting Is Important to
Business Stakeholders. Opentextbc.ca; OpenStax.
https://opentextbc.ca/principlesofaccountingv1openstax/chapter/explain-why-accounting-is-
important-to-business-stakeholders/