BSCAC 1.

2
FINANCIAL ACCOUNTING 2
PRESENTATION: GROUP 25

HAZEL KAZINGACHILE C20143089L

KUDZAI MAUNGWA C20143263H
RODNEY MATETA .L C20142053U
TAKUNDA SIMOYI .D C20141558F
BION GOROMBE C20141989X
PRECIOUS KUBISHA .T C20141907O
KUDZAISHE GWEDE .M C20142319E
PAMELA MASAITI .T C20142697L
PETRONELLA MUSHAIKWA C20142736X
WILFRED MUSHANGWE C20143263H
PANASHE MTIZWA C20141987C
MUNASHE ZIMBUDZANA C20141698E
TINOTENDA SUBAU C20142215S
ALDRIN MUGWANIRA C20142198R
EUVERT KAMUDZI C20142929A
PANASHE CHOTO C20142561G
MARSHALL O MUTERO C20141673B
NYASHA WARIKANDWA C20141300N
ENOCH T TICHAYANA C20142138L
FARAI TINARWO C20142024Y

The Conceptual Framework for Financial Reporting explicitly discusses the different users of
financial information and their needs. Identify any six users of financial information and
briefly elaborate on their information needs. [25]
Conceptual Framework is the coherent set of concepts for Financial reporting set by the
board as a platform for achieving the prime objectives of producing general purpose
financial statement, to provide useful financial information to satisfy the decision-making
needs of a broad spectrum(range) of users. A conceptual framework illustrates what you
expect to find through your research. It defines the relevant variables for your study and
maps out how they might relate to each other (Bas Swaen 2017). As there are internal users
of financial information, there are external users of this information. Internal users may
include managers, employees and owners whilst external users are investors, lenders and
the government.
Internal users
Managers need the financial information so as to aid them in their decision making. They
may use for example the Statement of profit and loss and other comprehensive income and
the Statement of financial position to help them in making the decision to either borrow
money or invest company resources, since it is their role to protect and manage the
company’s resources. The managers also use the financial information to compare the
company’s performance from each financial period so that they can determine whether the
business will be able to cover its debts and wages. This will help reduce chances of the
business being liquidised in order to pay creditors’ debt.

Employees on the other hand use financial information so that they know whether the
business will be able to cover their salaries or they risk losing their jobs. Employees and their
unions will compare Statements of financial position from separate financial periods so as to
determine the business’s profitability. If a business’s profitability is increasing by the year
then employees begin to expect an increase in their salaries. They also use financial
information to determine their job security whether they don’t face the risk of losing their
job in the near or far future and if the business will stay profitable in the long run.
The owners of the business will use the financial information to better aid them in their
decision making. Owners may use the Statement of profit or loss and other comprehensive
income to help decide whether to bring in more investors or cut management in order to
reduce expenses that is if the business is suffering losses. They can use this information to
assess how management is performing and how well they are managing company
resources. They can make decisions on whether to downsize the business in efforts to
manage expenses or expand in order to maximise profits by obtaining market value and
economies of scale all from viewing financial information.
External Users
Investors mostly need financial information, both current investors and potential investors,
so that they acquire the necessary information they need to decide whether to invest in a
new business or not, or whether to continue investing in their current business or take their
funds somewhere else. They are largely concerned with returns on investment. They can
use liquidity ratios to determine the liquidity of the business, cashflow statement to see the
amount of cash in the business and to know whether the business is able to pay their annual
dividends, if not the investors are most probably to take their funds elsewhere.
As for lenders, they may use financial reports to determine whether a business maybe
granted a loan or not. They may use liquidity ratios to see if the business will be able to pay
back the loan. If this plausible that the business is able to cover and pay back the loan then
lenders can confidently lend the business their funds but if not, the lenders may refuse to
give the business their money and hold on to their funds.

For the last user of financial information of businesses, the government, they may use
financial reports to track down tax fraud for businesses that may want to evade paying tax.
The government may also use this information to make future tax predictions based on the
performance of the company. The income tax department will analyse the Statement of
profit or loss and other comprehensive income to look at the amount a company is making
and determine the amount of tax which is to be paid.

In conclusion, a company’s financial information is quite important especially to the users of

this information, for both internal users such as managers, employees, directors, owners
and some not mentioned and for external users such as investors, government, lenders,
suppliers, customers and more. They use financial reports for different needs in their
decision making

REFERENCES
https://www.scribbr.com/dissertation/conceptual-framework/