FIN2603 Assignment 1
(COMPLETE ANSWERS)
Semester 1 2025 - DUE 2
April 2025
For assistance contact
Email:
, Question 1: Stakeholders Utilising Organisations' Financial Statements
Organisations' financial statements are crucial documents that provide a wealth of information
about a company's financial performance, financial position, and cash flows. This information is
vital for a diverse range of stakeholders who utilise these statements to make informed decisions.
Here are some key stakeholders and how they use financial statements:
1. Owners/Shareholders:
Purpose: Owners and shareholders are the primary investors in the organisation. They
use financial statements to assess the profitability of their investment, the financial health
and stability of the company, and the effectiveness of management in utilizing their
capital.
How they use them: They analyse the income statement to understand revenue
generation and profitability (e.g., net profit margin, return on equity). The balance sheet
helps them assess the company's assets, liabilities, and equity, indicating its financial
strength and solvency. The cash flow statement reveals the company's ability to generate
cash and manage its liquidity. Trends over time are particularly important for evaluating
performance and growth potential.
2. Management:
Purpose: Management is responsible for the day-to-day operations and strategic
direction of the organisation. They use financial statements as internal tools for planning,
monitoring, and controlling the business.
How they use them: Management uses the income statement to track revenue and
expenses, identify areas for cost reduction or revenue enhancement, and assess the
performance of different departments or product lines. The balance sheet helps manage
assets and liabilities efficiently. The cash flow statement is crucial for managing liquidity,
forecasting cash needs, and making investment decisions. Financial ratios and
performance indicators derived from these statements are used to benchmark
performance against targets and competitors.
3. Lenders/Creditors:
Purpose: Lenders, such as banks and bondholders, provide debt financing to the
organisation. They use financial statements to assess the borrower's creditworthiness and
ability to repay loans and interest.
How they use them: They focus on liquidity ratios (e.g., current ratio, quick ratio) to
evaluate the company's short-term ability to meet its obligations. Solvency ratios (e.g.,
debt-to-equity ratio) help assess the company's long-term financial stability and its ability
to handle debt. The income statement provides insights into the company's profitability
and its capacity to generate sufficient cash flow to service debt.
4. Suppliers:
(COMPLETE ANSWERS)
Semester 1 2025 - DUE 2
April 2025
For assistance contact
Email:
, Question 1: Stakeholders Utilising Organisations' Financial Statements
Organisations' financial statements are crucial documents that provide a wealth of information
about a company's financial performance, financial position, and cash flows. This information is
vital for a diverse range of stakeholders who utilise these statements to make informed decisions.
Here are some key stakeholders and how they use financial statements:
1. Owners/Shareholders:
Purpose: Owners and shareholders are the primary investors in the organisation. They
use financial statements to assess the profitability of their investment, the financial health
and stability of the company, and the effectiveness of management in utilizing their
capital.
How they use them: They analyse the income statement to understand revenue
generation and profitability (e.g., net profit margin, return on equity). The balance sheet
helps them assess the company's assets, liabilities, and equity, indicating its financial
strength and solvency. The cash flow statement reveals the company's ability to generate
cash and manage its liquidity. Trends over time are particularly important for evaluating
performance and growth potential.
2. Management:
Purpose: Management is responsible for the day-to-day operations and strategic
direction of the organisation. They use financial statements as internal tools for planning,
monitoring, and controlling the business.
How they use them: Management uses the income statement to track revenue and
expenses, identify areas for cost reduction or revenue enhancement, and assess the
performance of different departments or product lines. The balance sheet helps manage
assets and liabilities efficiently. The cash flow statement is crucial for managing liquidity,
forecasting cash needs, and making investment decisions. Financial ratios and
performance indicators derived from these statements are used to benchmark
performance against targets and competitors.
3. Lenders/Creditors:
Purpose: Lenders, such as banks and bondholders, provide debt financing to the
organisation. They use financial statements to assess the borrower's creditworthiness and
ability to repay loans and interest.
How they use them: They focus on liquidity ratios (e.g., current ratio, quick ratio) to
evaluate the company's short-term ability to meet its obligations. Solvency ratios (e.g.,
debt-to-equity ratio) help assess the company's long-term financial stability and its ability
to handle debt. The income statement provides insights into the company's profitability
and its capacity to generate sufficient cash flow to service debt.
4. Suppliers:
