Importance to Stakeholders’
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In today’s day and age there is no easy way of telling which companies are doing
well and which are almost down in the dumps.
Banks, lending facilities, and/or external
stakeholders are greatly interested in seeing where companies are in the market compared
to their competitors.
These companies take the most risk by investing their monies into
entities that are not started, maintained, or organized by themselves.
There are many
factors that come into play when external stakeholders are looking to make a decision on
where to place their money.
Those factors include, but are not limited to, the items being
sold or produced, the message the company has to offer, etc.
Most importantly external
stakeholders use financial information to make decision on whether the company is
profitable, has too much debit, etc.
“The information provided by the financial
statements help support their decisions and actions to the enterprise.” (Baskerville, May
Basically banks, lending facilities, and/or stakeholders need to know where a
company stands in the market and in profitability.
The best way for them to conclude
that is by looking at companies’ Financial Statements, financial reports, and with the use
of financial ratios.
Before getting into detail on financial reporting’s and what exactly they are it is
essential to understand who exactly those external stakeholders are.
stakeholders are composed of investors, lenders, suppliers, customers, Government
agencies, competitors, labor unions, supporters and opponents, just to name a few.
are essentially people and/or companies that may have interest in what goes on with
known businesses or companies.
Stakeholder’s main interests are profit growth and
dividends because their goal is to get a return on the money they invested.