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- The financial statements comprise Trade Accounts, Profit and Loss Accounts and Balance Sheets.
- Financial statement information is useful to the following parties:
Investors → knowing the return on investment
Creditors → knowing the ability to repay debt
Casher → knowing the financial position of business when considering a loan/overdraft
The management itself → to plan and control business activities and to compare business performance.
- Performance comparison can be done:
(a) internally – Financial statements between the accounting periods of the same firm.
(b) externally – Financial Statements between different firms of the same industry.