USES AND USERS OF INFORMATION. Learning Intentions Know the purpose of analysing financial information Know the purpose of analysing financial information.

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Presentation transcript:

USES AND USERS OF INFORMATION

Learning Intentions Know the purpose of analysing financial information Know the purpose of analysing financial information Controlling costs and expenditure Controlling costs and expenditure Forecasting trends and future planning Forecasting trends and future planning Monitoring performance Monitoring performance Know the main users of financial information Know the main users of financial information Owners, managers, shareholders, creditors, employees, government, citizens Owners, managers, shareholders, creditors, employees, government, citizens J W2

3 Controlling Costs and Expenditure The Trading profit and loss account and gross profit and net profit ratios can be used to highlight spiralling costs. Is the telephone bill too big? Are electricity costs increasing? Have production costs risen? Are profits good enough to give workers a BONUS? Is the Gross Profit Percentage too low? Should/can prices be raised? USE OF FINANCIAL INFORMATION (1)

J W4 Managers can plan for the future by using CASH FLOW For example  If the minimum wage rises will you need an overdraft to pay workers?  Will updating the equipment require a loan from the bank? USE OF FINANCIAL INFORMATION (2)

J W5 Monitoring Performance Comparing final accounts and their ratios with previous years. Comparing final accounts and their ratios with similar businesses. Figures can reveal whether the business is achieving its targets. If not, then action can be taken. USE OF FINANCIAL INFORMATION (3)

J W6 USERS OF FINANCIAL INFORMATION

J W7 Different people use information for different purposes Owners of a business To help make better informed decisions in the future. To control costs Other managers To work more efficiently within budgets etc. Work out profitability of departments.

J W8 SHAREHOLDERS  To check how well their investment is doing. This could affect their dividend rates. OWNERS  To find out profits and compare with previous years. This aids decision-making.  To check that there is sufficient cash to meet debts etc. CREDITORS  To check that the firm will be able to pay its debt to them.  To look for trends of stability.

J W9 EMPLOYEES  To feel secure in the knowledge that their job is safe.  To see if a wage rise is possible.  To see whether a bonus will be paid or not. GOVERNMENT  The Inland Revenue receive tax from companies. CITIZENS  Will the business provide jobs for the community?  The local authority might need this information to estimate if more housing/schools may be needed.