Management: To allow management to make effective decisions, all areas of accounting information are of interest to them. Management will use the accounting information to compare performance with previous years and competitors, identify areas of improvement, plan future resource allocation, decide purchasing and pricing policies, etc. The company’s past performance can be assessed using the final accounts and ratio analysis. The ratio analysis can then be compared with previous years or with competitors to show areas of possible improvement or investigation. Budgets are also an important source to management—these are used to identify possible future problems so that proactive measures can be taken.
Employees: Employees are generally interested in job security and future salary negotiations. They will therefore be particularly interested in profitability and the company’s future prospects. The company’s profitability will be used as the basis of future salary negotiations. Employees (or Trade Unions) will therefore refer to the trading, profit and loss account and profitability ratios.
Present Shareholders: Present shareholders are primarily interested in the value of their shares and the return on their investment. This group of users will therefore require the financial accounting information for the purpose of assessing the profitability of the company. Present shareholders will use this information to help decide whether to remain a shareholder in this business or to sell their shares and invest elsewhere.
Potential Shareholders: Like present shareholders, potential shareholders will be interested in the value of and return on their investment. More specifically, potential shareholders will compare with others to ascertain the best investment option.
Short-term Creditors: They will be analyzing the liquidity and long-term future of the business to decide the level of finance to be given. Short-term investors use the financial...