Business Decisions: Using Financial Statements

Business Decisions: Using Financial Statements
The following is a short list of some of the users & uses of financial statements. This list is by no means complete:
1. Prospective investors, to decide in which companies to invest;
2. Equity & debt investors, to monitor the performance of management;
3. Banks & other lenders, to decide on whether to make new loans, or continue existing loans;
4. Investment analysts, money managers, & stock brokers, to make investment recommendations or decisions for their clients;
5. Rating agencies (such as Standard & Poor's, Moody's, & Dun & Bradstreet), to assign credit ratings;
6. Major suppliers & customers, to evaluate the strength & financial staying power of the company as a long-term resource for their business;
7. Labour unions & employee associations, to assess what the company may be able to afford to pay in upcoming labour negotiations;
8. Management, to assess the company's standing with the present & potential investors, bankers, the financial community, customers, suppliers, & workers;
9. Management, to review their effectiveness in running the business, & to plan the future of the company;
10. Corporate raiders, seeking hidden value in companies with underpriced stock (e.g. Warren Buffet);
11. Competitors, to benchmark their own progress in the industry against what the company has achieved;
12. Potential competitors, to assess how profitable it may be to enter the industry, & how strong a competitor the company would be;
13. Government agencies who are responsible for taxing, regulating, investigating the company;
14. Politicians, consumer advocates, single issue groups, lobbyists, environmental activists, foundations, & other parties who are either promoting or fighting a particular cause;
15. JV (joint venture) partners, trade associations, franchisors or franchisees, & other present or potential business associates who have an interest in the company & its financial position.
This brief list shows how important & useful the roles are that financial statements play in the business world. It also shows how essential it is for managers to master the understanding, analyses, & use of financial statements for making business decisions.