Elaborate why the following groups might want financial accounting information. What type of info would each group find useful? 1. Company's existing shareholders 2. Prospective investors 3....
Elaborate why the following groups might want financial accounting information. What type of info would each group find useful?
1. Company's existing shareholders
2. Prospective investors
3. Financial analysts who follow the company
4. Company managers.
5. Current employees
6. Commercial lenders who have loaned money to the firm
7. Current suppliers
8. Debt rating agencies such as Moody's or Standards & Poor's
9. Regulatory agencies such as Federal Trade Commission.
Lastly, identify at least one other group that might want financial accounting information about the company & describe how it would use the info.
Company managers and other employees of the company need more detailed accounting information to help then in their planning, operating and controlling function. In a company there are many different type of functions performed buy different managers and other employees. Each such person needs accounting information pertaining to his or her responsibilities.
It is worthwhile noting that a company tries to give its managers and employees the maximum and the best information required by them in performance of their duties. However, other groups of people are not likely to get all the information they would like to have even if it is available with the company. Thus for groups of people other than managers and employees of the company the information available may be much less than what they would like to have.
Company shareholders, prospective investors and financial analyst use the accounting information for the same overall purpose, that is to assess the current performance and future prospects of the company. The only difference in the kind of accounting information they use is the efforts they make to obtain the information and their skill and other ability to use it.
A second group of persons use accounting information to assess the credit worthiness of the companies. This group of people include lenders, suppliers and credit rating agencies. While these people need to assess the the general performance and prospect of the companies they give special emphasis on the data relating to the indebtedness of the company, their assets and their performance in terms of meeting their payment obligations.
Regulatory agencies do not really go into detailed analysis of the accounting information of each company. They are more interested in ensuring that the information they release to general public including to investors and creditors is reliable and meets some minimum standards of disclosure. Towards this end the information that companies need to formally file with the regulatory agencies must conform to laid down standards such as GAAP. Such accounting information covers the overall requirements of creditors,as well as investors. In addition they need to provide accounting information to establish that they have conformed to statutory requirements such as corporate tax laws.