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Financial Performance And Liquidity Of A Company

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Financial Statements are used to record and provide information on the financial activities of a business, person or entity, this information is used by a wide range of entities in order to make economic decisions (Reference). These reports quantify the financial strength, performance and liquidity of a company and are intended to be understandable to audiences who have an adequate knowledge of economics and accounting. To acquire a better knowledge of financial statements it is important to understand why they are put together in the first place. From a company’s financial statement various information is provided in order to allow investors and creditors to evaluate a company’s financial performance, with different financial statement…show more content…
For an organisation, financial statements are the principal method in which they can make available financial information to a wide range of entities, who use this information to assess a company’s current condition, prospects for growth and potential financial risks. Therefore, financial statements provide important information to a wide number of users both internal and external in terms of making economic decisions, these are known as stakeholders (Reference). There are a number of different stakeholders who use accounting information and they all have specific requirements when it comes to their information needs, the following are types of stakeholders in a company; owners, investors, management, lenders, trade creditors and suppliers, the government, employees, customers and the general public. In terms of internal and external there are certain key users of this information.
Firstly we will look at key internal users; financial statements give owners an overview of their total return on investment. Furthermore, Owners can sometimes be managers so their interests can dovetail with managers, who use the information provided from financial statements to assess
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