Users of Accounting Information

Accounting information can be obtained by looking at various financial statements like balance sheet, profit and loss account funds flow statement, cash flow statement and so on. There are many parties which look this information, given below are the users of accounting information –

  1. Management – The top managements is the first party which is interested in looking in this information because they are directly affected by this information as their job as well as future is dependent on financial performance of the company. Their emphasis is on information like operating profit margin, earnings before interest and tax, budgeted sales and actual sales, cash flow position of the firm and so on. A good performance will indicate their efficiency while a bad performance would signal their inefficiency and may result in some of them losing their jobs.
  2. Shareholders – Shareholders are interest in figures like EPS, PE ratio of the company, its operating margin, dividend payout ratio, dividend Yield ratio and future plans or projects of the company so that they can be assured about the future of their investment which they have made in the company.
  3. Customers – They look into the accounting information to see whether the company future is bright or not because when the customer buy a product he or she wants after sales services also and if a company goes out of business or bankrupt then there is no way that customer can get after sales service and the product which the customer has purchased is of no use if it gets damaged.
  4. Creditors – All companies take money or material from creditors and they pay in order to earn interest from the company. Creditors are interested in various ratios like debt to equity ratio, debt to asset ratio, operating leverage, financial leverage, creditor turnover ratio and cash flow position of the company.
  5. Government – Government also look closely at accounting information like profit after tax of the company, whether a company is fulfilling the various statuary requirements or not, prompt tax payment without any evasion and also how a company is doing its corporate social responsibility.
  6. Employees – A good organization keeps its employees happy and that is the reason why people before joining the jobs and those who are doing the job are always interested in knowing how organization stand in comparison to its competitors in the sector and also whether company is making provision for employees like employee stock option plan, contribution towards provident fund of the employees an so on.
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