Financial Reporting · Calculation and interpretation of accounting ratios and trends to address users' and stakeholders' needs

Users and Stakeholders of Financial Statements and Their Information Needs

Updated 11 October 2026 · Fact-checked

Users of financial statements are the groups who rely on them to make decisions: investors, lenders, employees, customers, suppliers, government and the public. Each group needs different information. To answer an exam question, identify the user, state their need, then choose ratios that address it and interpret them.

Understand Users and Stakeholders of Financial Statements

Financial statements are prepared for people who cannot demand information directly from the company. The IASB's Conceptual Framework calls the main users existing and potential investors, lenders and other creditors. They need information to decide whether to buy, sell or hold shares, or to lend or settle debts.

A stakeholder is a wider idea. It is anyone with an interest in the entity: employees, customers, suppliers, tax authorities, regulators, competitors, the local community and the public. Many of them are not primary users under the Framework, but ACCA questions often ask what they would want from the accounts.

Internal users are inside the business, such as managers and directors. They can get detailed management accounts on request. External users are outside it and depend mainly on published financial statements. Do not mix these up: managers are internal, and most other groups are external.

Each group asks a different question. Shareholders ask about return and growth. Lenders ask about safety: can interest and capital be repaid? Suppliers ask whether they will be paid on time. Employees ask about job security and pay. Tax authorities ask about profit and compliance.

Ratio analysis turns raw figures into answers. Profitability ratios suit investors and management. Liquidity and gearing ratios suit lenders and suppliers. Investor ratios such as EPS and dividend cover suit shareholders. Matching the ratio to the user is what earns marks.

Key rules to remember

Return on capital employed (ROCE): ROCE = profit before interest and tax ÷ (total assets − current liabilities) × 100; Used by investors and lenders to judge overall efficiency of capital use.
Current ratio: Current ratio = current assets ÷ current liabilities; Used by suppliers and short-term lenders to judge ability to pay debts due within a year.
Gearing: Gearing = debt ÷ equity × 100 (or debt ÷ (debt + equity) × 100); Used by lenders and shareholders to judge financial risk. State which version you use.
Interest cover: Interest cover = profit before interest and tax ÷ finance costs; Used by lenders to judge whether interest is safely covered by profit.
Earnings per share: EPS = profit attributable to ordinary shareholders ÷ weighted average number of ordinary shares; Used by investors to assess return per share.
Dividend cover: Dividend cover = profit for the year available to ordinary shareholders ÷ ordinary dividends; Used by investors to judge how sustainable dividends are.

How to solve Users and Stakeholders of Financial Statements questions

Use this method for any question asking what a user group needs or how ratios help them.

1Identify the user group named in the question, and note whether it is internal or external.
2State in one sentence the main question that group is trying to answer, such as safety of a loan or return on investment.
3Choose the information in the financial statements that answers that question: profit, cash, liquidity, debt levels, dividends or trends.
4Select two or three specific ratios that measure it, and give the formula if a calculation is needed.
5Calculate the ratios, if figures are given, and compare them with prior year, industry or a target.
6Interpret the result from the user's viewpoint and state a clear conclusion for that user.
7Mention one limitation, such as the statements being historical, or different policies reducing comparability.

Quickest way: User, need, ratio, verdict

When to use it: Use it for short Section A or B questions, and as the skeleton for a Section C written answer.

Write the user and its key worry in a few words, for example: lender, repayment.
Pair it with the ratio family: lender with gearing, interest cover and liquidity; investor with ROCE, EPS and dividend cover; supplier with current ratio and payables days.
Give the number or trend, then a one-line verdict such as improving or worsening for that user.
In objective questions, eliminate options naming the wrong user type or a ratio that does not fit the need.

Common mistakes in Users and Stakeholders of Financial Statements

Listing users without explaining what each needs.
Students memorise a list of groups and stop there.
Fix: Link every user to a specific question and to information in the statements that answers it.
Treating managers as external users.
Managers use the accounts, so they seem like any other user.
Fix: Managers are internal and can obtain management information directly. Published statements mainly serve external users.
Recommending the same ratios for every user.
Students apply a standard set of ratios automatically.
Fix: Choose ratios that fit the decision: gearing and interest cover for lenders, EPS and dividend cover for shareholders.
Calculating ratios but giving no interpretation.
Calculation feels safer than commentary.
Fix: After each ratio say what it means, how it compares, and what the user should conclude.
Confusing users with stakeholders.
The terms are used loosely.
Fix: Primary users are investors, lenders and other creditors. Stakeholders are any group with an interest in the entity, including the wider public.
Claiming financial statements give everything users need.
Students overlook the limits of historical data.
Fix: Note that statements are historical, based on estimates, and cannot meet every user's needs. Users may need other sources.

Worked examples

Example 1

A bank is considering a loan to Zeta Co. Zeta's profit before interest and tax is $600,000 and finance costs are $150,000. Debt is $1,000,000 and equity is $2,000,000. Calculate two ratios the bank would use and comment.

Show the solution

The bank is an external user who wants to know if the loan is safe and the interest affordable.
Interest cover = 600,000 ÷ 150,000 = 4 times.
Gearing = debt ÷ equity = 1,000,000 ÷ 2,000,000 = 50%.
Interpret: profit covers interest four times, so there is a reasonable buffer. Gearing at 50% on a debt-to-equity basis is moderate, but should be compared with the industry and prior year.
Limitation: the figures are historical, so future profit is not guaranteed.

Answer: Interest cover is 4 times and gearing is 50% (debt ÷ equity). Both suggest the loan is reasonably safe, subject to comparison with the industry and the trend.

Example 2

Explain what a trade supplier and an ordinary shareholder would each want to learn from Yara Co's financial statements, and name one ratio for each.

Show the solution

Supplier: wants to be paid on time, so needs to know whether the company can meet short-term debts. Ratio: current ratio (current assets ÷ current liabilities), or payables days.
Shareholder: wants a return on investment through dividends and share price growth. Ratio: EPS or dividend cover, or ROCE for overall performance.
Compare: the supplier looks at liquidity and short-term cash, the shareholder looks at profit and long-term growth.
Conclude that the same statements serve both, but different ratios answer their different questions.

Answer: The supplier wants confidence of payment, measured by the current ratio. The shareholder wants return and growth, measured by EPS or dividend cover.

Exam tips

Always name the user in your answer and write from their viewpoint. Generic commentary scores poorly.
In Section C, structure answers by user, then ratio, then conclusion. Use short headed paragraphs.
In objective questions, check whether the user is internal or external and whether the ratio matches the need before choosing.
Give a comparison for every ratio: prior year, industry or target. A number alone earns little.
Mention limitations briefly. One sentence on historical data or comparability is usually enough.

Practice questions from Calculation and interpretation of accounting ratios and trends to address users' and stakeholders' needs

Users and Stakeholders of Financial Statements in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Users and Stakeholders of Financial Statements: frequently asked questions

Who are the users of financial statements in ACCA FR?

The Conceptual Framework names existing and potential investors, lenders and other creditors as the primary users. Others such as employees, customers, suppliers, governments and the public also have an interest. Exam questions often ask about any of these.

What is the difference between internal and external users?

Internal users are inside the entity, mainly managers and directors, and can access detailed management information. External users are outside, such as investors, lenders and tax authorities, and rely mainly on published financial statements.

Which ratios suit which users?

Investors use ROCE, EPS and dividend cover. Lenders use gearing, interest cover and liquidity ratios. Suppliers use the current ratio and payables days. Employees look at profit trends and the strength of the business.

Are stakeholders and users the same thing?

No. Stakeholders are anyone with an interest in the entity, including the community. Users are those who use the financial statements for decisions. Most users are stakeholders, but not every stakeholder is a primary user.