Non-Management External Users and Financial Information: A Case Study of Tesco PLC

The non-management External users of
the organisation and the financial
information

Table of Contents
Introduction:....................................................................................................................................3
The description of the non-management external users..................................................................3
How the financial information is fulfilling the requirement of information of the non
management external users..............................................................................................................5
Conclusion.....................................................................................................................................13
Reference:......................................................................................................................................15
Appendix:......................................................................................................................................16
Latest financial ratios for Tesco PLC (2017-2008)...................................................................16

Introduction:
The chosen organisation Tesco PLC is the leader of the grocery retail super market of the UK
and holds around 28% share of the market .In every year the organisation release an annual
report that represents the major financial statements[income statement, balance sheet cash flow
statement] along with other financial reports[changes in share holder’s equity, fund flow
statement etc] of the organisation so that the external users of the organisation can gather
sufficient information regarding the financial performance as well as the financial position of the
organisation(Kantarworldpanel.com, 2018). The financial report that is used some of the major
non management are the investors, Trade creditors, Institutional as a well as private investors ,
Tax Authorities and Regulatory Agencies, Customers, Employees and the labour Unions. The
chosen organisation complies with the requirements of the International Accounting Standards
(IAS)and the United Kingdom Generally Accepted Accounting Practice[UKGAAP] and the
International Financial Reporting Standards(IFRS) regulated by the International Accounting
Standards Board (IASB)( Wood et al.,2016).
The description of the non-management external users
The major five non-management external users of the organisation that use the annual reports as
well as the finacial statements o f the organisation are as follows:
The potential new Investors are the most important external user of the financial reports of Tesco
PLC as they may not be the part of the management but they are very much interested in past
financial performance of the business or better to say the historical financial performance of the
business. This inference regarding the future will help the investors to regulate the investment
decisions with respect to the organisation in terms of duration of investment and the ,amount of
investment to be made so that maximum return can be generated. The investors study the
financial statements that are presented in the accounting reports released by the organisation for
the purpose of studying the summary of the performance of the different fund generating
activities of the organisation. This study will help the organisation to assess the efficiency of the

different revenue generating activities of the organisation. The existing investors on the other
hand study the financial report to decide where to hold the investment (which to a large extent
depends upon the financial position of the organisation) or it is better to withdraw the
investments made for the maximization of the returns(Booth and Hamer, 2009)
Trade Creditors or Suppliers are other non-management external users of the financial statement
of the organisation who study the financial report for gathering information regarding the
financial situation as well as liquidity position of the organisation to assess the credit repayment
capability of the organisation. These are the persons who supplies goods and services and raw
material to the chosen organisation TESCO PLC for credit and it is essential for them to
understand the credit repayment capability of the organisation to determine the duration of the
credit period and the possibility of the credit period and to determine also the volume of goods
and services that will be supplied on credit to the organisation. These external users mainly study
the liquidity position of the company, the income statement that describes the profit earned by
the organisation (in a particular period under consideration) and also the cash flow statement to
study the liquidity position of the organisation
Banks and Other private Lenders will study the financial report of the organisation to assess the
debt repayment capability of the organisation. The debt repayment capability of the business to
great extent depends upon the sustainability or stability of the organisation that are reflected
either a stable cash generation capacity or steadily rising cash generation capacity of the
organisation that will gradually strengthen the liquidity position of the organisation by enhancing
the volume of free reserves within the organisation that will strengthen the debt repayment
capacity of the organisation. Apart from the study of the liquidity position the lenders also look
for the different historical ratios that will describe the debt repayment pattern of the organisation
and such ratios are the debt equity ratios, debt asset ratio, interest coverage ratio all that describes
the importance of debt in the capital structure of the borrowing company and how the debt is
managed by the organisation. Beside, the debt equity ratio is specifically studied by the lenders
to understand the purpose of borrowing. That is, a lender who is going to lend certain amount to
Tesco PLC will deeply study the historical debt-equity ratio of the organisation to study to what
extent the debt is taken to utilize the advantage of financial leverage and top whit extent the debt
has been taken to finance some investment projects as the organisation has reached to a