Importance of Financial Information to Stakeholders

Financial information contain in annual reports that the companies are published in periodically. That period is identified as reporting period. Company obligates to provide financial information to their various stakeholders during the past reporting period.

Annual report is a report the company report their comprehensive transactions and events to publish and provide for required parties. There are few reasons to publish annual reports by companies generally as follows.

Because companies have legal obligation between companies and the government act implemented for companies is known as company act 2007 No 7. The company act’s section 150, 151, 152 and 153 has mention the obligation to prepare financial statements, content and form of financial statements, obligation to prepare group financial statements and content and form of group financial statements accordingly.

Stakeholders of the company require the financial information for following reasons.

• To know how well the company is doing.
• To find company has earned more money than they spent.
• To get an idea about strategic and tactical plans of the management.
• To provide information to make decisions who make decisions about organisatoin.
• Avoid dissimulations and corruptions of the organisation.

Through the audit process, organisations will be able to identify weaknesses of their control of procedures and corruptions occurred due to them.

To obtain and fulfill the financial requirements from monitory markets via financial equipments such as shares, debentures, bank loans and etc.

Importance of Financial Information to Stakeholders

However the financial information require by stakeholders of the organisation. Stakeholder of the organisation can divide into two. The bellow chart represents the stakeholders of the organisation according to the environment they belongs to.

External stakeholders

a). Suppliers and Trade creditors

b). Government

c). Consumers

d). Public

e). Medias

Internal Stakeholders

a).Directors & Managers

b). Shareholders

c). Employees

Above chart shows the deviation of stakeholders of the organisation and they require financial information due to various purposes.

Directors and Managers

To make decisions about the organisation in different time and in different level. Directors and managers of the organisation are taking different types of decisions as follows.

• About new investment and project appreciation decision.
• About continued and discontinued operations.
• Dividend decisions.
• Diversified business decision.
• Winding up decision.
• To establish overall objectives and periodical targets.
• To avoid dissimulations and corruptions.
• To establish squired systems and strengthens control of procedures.
• To increase the productivity level of the organisation.

Shareholders

• To determine whether their investment will be sold, Holt or bought more shares of the organization.
• To decided the fairness of the returned for their investments.
• To determine the going concern of the organisation.
• To obtain wide knowledge about the organizational activities.
• To compare their investments and their benefits with other competitive organizations and industries.

Employees

• To know about the stability and profitability of the employer.
• To know about remuneration, retirement benefits, and employment opportunities are in organisation
• To ensure the job security with the current employer.
• To ensure the fairness of the salaries and wages they obtain from the organization according to their earnings.
• To have a clear view about other operations of the organisation.

Suppliers

• To ensure their payments of supplies will be received on due.
• To ensure the stability of their customers.
• To have knowledge about other products and their suppliers of the organisation.
• To compare their transaction with existing and other companies
• To find other competitive suppliers and their contribution towards the organisation.
• To find opportunities to supply more.

Government

• To collect accurate taxes and amounts from organizations on due dates.
• To provide government benefaction to improve their business.
• To obtain financial and non-financial assistance for government development projects.
• To ensure the organizations oversee their employees in reasonable way.
• To ensure the organizations compliance with government rules, regulations and acts that established by the government.

Consumers

• To have knowledge about the cost structure of the products that the organisation is producing.
• To ensure the stability of the organisation.
• To know about the organization’s profitability, because profitability is a shed light to know about products impossible growth, improvements, best customer service and low price strategic implications.
• To know about CSR programs conducted by the organisation.

Public

• To conscious about organization’s substantial contribution towards the society.
• To know about the opportunities to link with the organisation.
• To know about CSR contribution towards the country.
• To conscious their activities which can be affected to interest of the nature and the country.