All companies both publicly traded and private limited engage business transactions each and every day to their clients and related parties. The purpose of financial information is to have a clear understanding about the business performance for a given time period. Business and managers need financial information in various different purposes. Financial information provides many key insights of the business and assessment about the operational efficiency, profitability and financial performance for a given time. Reasons for need of financial information are as follows:-
Why Do Managers Need Financial Information
To analysis business performance: Financial information provides an overall picture of operational result of a business and managers need such financial information to analysis for making future plan and strategy about the organization. These financial information is much more valuable both internally and externally in order to compare and make nest operational strategy to become more successful in the upcoming years.
To make and implement strategy: With a view to staying competitive in today’s competitive business environment, managers analyze the financial information and make strategy according to the analysis and considering others related factors of the business. Business managers also analyze competitor’s business and make some tactical decision to gain maximum benefit from these business strategies. These strategies require huge investment and help to gain competitive advantage over its competitors and allow identifying weakness and opportunity.
To make investment decision: Managers analyze financial information to inspect whether any merger and acquisition opportunity is available and it helps to determine the probable investment opportunity. Investment can be done many different ways and managers find and analyze the suitable solution for the company which may bring maximum return for the organization from many alternative investment opportunity.
To address risk associated with the business: Business is always risky and without risk no business organization can achieve its goal and objective. Therefore, managers review the financial information to see whether any possible future risk is coming and associated with the economy. They evaluate different kinds of risk factors associated with the business activities and make strategy in order to lessen such risk and work for implementing the operational strategy successfully.