GCU ACC 502 Topic 1 DQ 1
Power users, who are external users of financial information, evaluate the information because they need it to make decisions. Power users can look at key metrics like the return on assets (ROA) and debt-to-equity ratio among others.
A bank would evaluate financial statements because they need them to assess their own risk exposure relative to other banks in the industry. Investors would use data from financial statements as part of their analysis when looking for opportunities in a particular sector.
Suppliers, such as a company’s bank and its suppliers, would use financial statements to assess their own risk exposure relative to other suppliers in the industry. Customers of a particular company look at the financial statements when making a decision (La Torre et al., 2018). They would want the information to judge whether a particular company is financially efficient or not .
Another example of an external party might be an analyst for a given sector assessing financials for a given company.A financial analyst for a bank might use the data for their own portfolio. They would need to assess how much risk is involved in their own bank’s loans (La Torre et al., 2018). They would also check the company they are evaluating to see if they have a good chance of earning an acceptable return on any investments they may have in that company.
REFERENCES
La Torre, M., Sabelfeld, S., Blomkvist, M., Tarquinio, L., & Dumay, J. (2018). Harmonising non-financial reporting regulation in Europe: Practical forces and projections for future research. Meditari Accountancy Research.