Stakeholders’ and Financial Statements

Carol Watts

Intermediate Accounting I
ACC305

In today’s day and age there is no easy way of telling which companies are doing well and which are almost down in the dumps. Banks, lending facilities, and/or external stakeholders are greatly interested in seeing where companies are in the market compared to their competitors. These companies take the most risk by investing their monies into entities that are not started, maintained, or organized by themselves. There are many factors that come into play when external stakeholders are looking to make a decision on where to place their money. Those factors include, but are not limited to, the items being sold or produced, the message the …show more content…
Statement of cash flows is also a financial report that external stakeholders use to determine what to do with a business. The statement of cash flows is important because it details the use and sources of income of that business. This statement is broken down into three sections. These divisions are the operating section , the investing section and the financing section. Each section is important on its own because it gives details of how well a company runs on a daily basis. Operating activities section details cash generated form business activities. The investing section ‘reports information for the purchases and sales of investments and fixed assets.’ (Thomason, n.d.) The financing section shows the use of external funds from lenders and stakeholders. The statement of cash flows report is very important because it shows the daily usage, which is basically how a company is run. This report is also important because low numbers can mean low sales or that their products or services have a low demand. Fewer assets compared to previous years may mean that a company had to sell their assets to raise their cash, which typically is not a good scenario. The financing section is also important because it shows if dividends were paid to the stakeholders. Essentially what stakeholders want is a return on their money because it gives a faster return on their