Increase Productivty

Understanding Financial Statements and Annual Reports (3)

Accounting is the language of business. It is the vehicle for communicating financial information about a company to many different groups of people: managers, owners, creditors, investors, customers, suppliers,
government agencies, economists, and others. Each of these groups may have different uses for the information. Owners are concerned that the company produce a profit and increase their wealth. Creditors want to know that the company is liquid enough to make debt payments and solvent enough to repay the loan principle if the business fails. Managers want to be compensated for their work and have confidence their employer will provide job security. Customers and suppliers want to benefit from their ongoing business relationships.The government wants to ensure the public good, by collecting taxes and improving financial reporting.All these stakeholders can benefit and achieve their objectives if they have good accounting information.

Accounting is an ever-changing communicative system. All parties with a stake in the economic environment, upon which accounting reports, continually press for improvements in the information that
accounting systems provide.This book presents many traditional as well as new ways of examining financial information that will facilitate the user’s making effective decisions.This chapter provides an overall view of
the information typically provided in financial statements.