Financial Statement Analysis: Users and Their Information Needs

This report provides an analysis of financial statements and their importance to various stakeholders. It explores how shareholders, lenders, creditors, and management use financial information to make informed decisions. The report specifically examines Telstra's financial statements, highlighting the significance of acquisitions, cash flow, profitability, and other key metrics. It emphasizes how the financial statements provide crucial insights for investment decisions, assessing financial strength, and understanding the impact of business strategies on the company's performance. The analysis considers the perspectives of different user groups, demonstrating the diverse ways financial information is utilized for economic evaluation and strategic planning. The report references Telstra's Annual Report and other sources to support the analysis.

Question:
Evaluates the usefulness to users of the above financial statement information
The users of financial statement generally encompass the following:
(a) Shareholders: Owners of the company;
(b) Debenture holders: Person who lent money to the company;
(c) Creditors: Suppliers of materials;
(d) Debtors: Customers of company;
(e) Government: For the purpose of collection of taxes, duties etc; (Accounting verse.com,
2019)
(f) Management: Manages the company and take economic decision etc
The detail usefulness of information of above financial statement information to the users
have been provided here-in-below:
(a) Shareholders/ owners/ investors of the company
They are the owners of the company and have lent initial capital to the company. They
have a crucial interest in such information as it reflects the future prospects of the
company. The acquisition of a company shows inorganic growth strategy and such
acquisition entails shareholders to analyse the potential synergy and value addition to
the company on such acquisition. Further, the acquisition pumps out huge cash funds of
the company so it is very crucial for the owners to be aware of the utilisation of their
assets. Further, it also helps them to take crucial decision of holding, buying and selling
the shares of the company. Also, the financial statement information helps to analyse
the profitability of the company, cash flows, notional expenses and the utility of
acquiring companies. Thus, the financial statement provides a lot of details to the
owners to take valuable economic decision of increasing stake or decreasing it.
(b) Lenders
The lenders of the company are deeply interested in the financials of the company as it
helps them to analyse the safety of their investment. In the current case of acquisition of
Ooyala Inc. for a cash consideration of $ 270 Million, particularly interested the lenders
as it pumped out huge cash of the company and reduced its ability to repay. Further,
increase in expense of the company also reduced the EBIT which has crucial impact on
lenders. Also, the profits of the company helps them to understand the financial
strength and repaying capacity.
(c) Creditors
Creditors are particularly interested in such information as they regularly trade with the
company and are particularly interested in cash reserves and operating profit of the
company. Further, an increase in trade payables year on year act as a warning bell to
them. Also, the profits of the company helps them to understand the financial strength
and repaying capacity.
(d) Government

Government is particularly interested in the financials of the company and all news of
acquisition, divestment particularly attracts the interest of the government to analyse
the compliance with the statutory regulations encompassing competition act, income
tax etc. Further, it also helps for formulating effective plans and policies for economic growth
(e) Management
Management of Telstra Limited shall be particularly interested in the financial
statement as it helps them to take future economic decisions, analyse the cash reserve,
present investments, holdings etc. It also helps them to analyse the impact of
acquisition, divestment, impairment, increase in trade payable, operating expense etc on
short term and long term goals of the company. ( telstra.com, 2019)
References
telstra.com. (2019, October 6). Telstra Annual Report 2019. Retrieved from www.telstra.com.au:
https://www.telstra.com.au/content/dam/tcom/about-us/investors/pdf%20F/2019-Annual-
Report.PDF
Accounting verse.com. (2019, October 6). Users of Financial Statement. Retrieved from
www.accountingverse.com: https://www.accountingverse.com/accounting-basics/users-of-
financial-statements.html