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Strategic Business Reporting (International) · Analysis and interpretation of financial and non-financial information and measurement of performance

Stakeholder Information Needs and Performance Analysis in SBR

Updated 11 October 2026 · Fact-checked

Stakeholder information needs analysis means identifying who is reading the information, what decision they face, and which financial and non-financial measures answer it. Investors look at returns and growth, lenders at cash flow and security, management at operations. You then interpret the numbers in context and conclude for that user.

Understand Stakeholder Information Needs and Performance Analysis

A stakeholder is any person or group affected by, or interested in, an entity. In SBR the main ones are investors, lenders, management, employees, customers, suppliers, regulators and the wider community. Each asks a different question, so one set of financial statements does not serve all of them equally.

The IASB Conceptual Framework says general purpose financial reports target existing and potential investors, lenders and other creditors. They cannot demand information directly from the entity, so they rely on these reports. Management, regulators and others can ask for tailored information. This is why the Framework focuses on capital providers.

Think in terms of decisions. Investors decide whether to buy, hold or sell. They care about profitability, growth, returns, risk and dividends. Lenders decide whether to lend and on what terms. They care about cash generation, gearing, interest cover, liquidity and security. Management needs detailed, timely data to control operations and meet targets. Employees care about job security and pay. Regulators and tax authorities care about compliance.

Financial information is expressed in money and comes mainly from the financial statements: revenue, profit, cash flow, assets, debt. Non-financial information is not a money amount in the accounts. Examples are customer satisfaction, employee turnover, market share, product quality, safety record, carbon emissions and order backlog. Financial measures are historic and show results. Non-financial measures often show drivers of future results, so they can act as early warnings.

Performance analysis in SBR is more than computing ratios. You must interpret: compare to prior years, to competitors or the industry, and to targets. Then explain the causes, state the limits of the data (accounting policies, one-off items, year-end timing) and give a conclusion for the stakeholder in the question. The marks come from application to the scenario, not from listing generic ratios.

Key rules to remember

Return on capital employed (ROCE)
ROCE = profit before interest and tax ÷ (total assets − current liabilities) × 100
Investor and management measure of overall efficiency. Define it in your answer if the company uses a different version.
Gross and operating margin
Margin = profit ÷ revenue × 100
Use gross profit or operating profit. Shows pricing power and cost control.
Asset turnover
Asset turnover = revenue ÷ capital employed
ROCE = operating margin × asset turnover. Use this to explain why ROCE changed.
Current ratio
Current ratio = current assets ÷ current liabilities
Short-term liquidity. Of interest to lenders and suppliers.
Gearing
Gearing = debt ÷ equity, or debt ÷ (debt + equity), × 100
State which version you use. Lenders and investors assess financial risk.
Interest cover
Interest cover = profit before interest and tax ÷ finance costs
Lenders use it to judge ability to service debt.
Earnings per share
EPS = profit attributable to ordinary shareholders ÷ weighted average number of ordinary shares
Investor measure. Compare over time, not just at one date.
Dividend cover
Dividend cover = profit attributable to ordinary shareholders ÷ ordinary dividends
Shows how sustainable dividends are.

How to solve Stakeholder Information Needs and Performance Analysis questions

Use this method for any question asking you to assess performance or position for a given user.

  1. 1Identify the stakeholder and the decision they face. Underline it in the requirement and the scenario.
  2. 2Select a small set of measures that fit that decision. Choose both financial and non-financial measures where the scenario gives them.
  3. 3Calculate only what you need. Show the formula or basis so markers can follow your work.
  4. 4Compare: with the prior year, a competitor, industry data or a target. A figure alone earns little.
  5. 5Explain the causes using scenario facts, such as a new contract, a price cut, an acquisition or an accounting policy change.
  6. 6State limitations: one-off items, differing policies, estimates, year-end timing, and information that is missing.
  7. 7Conclude for the stakeholder with a clear recommendation or judgement, and say what further information you would request.

Quickest way: Who, what, so what

When to use it: When time is short and you must write a focused interpretation of about 10 to 15 marks.

  1. Write the stakeholder and decision in one line.
  2. Pick three or four key measures, including one non-financial measure.
  3. For each, write: figure, comparison, reason, meaning for the stakeholder.
  4. Add one sentence on a limitation of the data.
  5. Finish with a two-line conclusion. Do not spend time on measures that do not affect the decision.

Common mistakes in Stakeholder Information Needs and Performance Analysis

  • Listing ratios with no interpretation

    Calculating feels productive and is easier than explaining.

    Fix: For every figure, add a comparison, a cause from the scenario and what it means for the user.

  • Treating all stakeholders the same

    Students use one generic ratio set from memory.

    Fix: Start from the decision. A lender needs cash flow and cover. An investor needs returns and growth.

  • Ignoring non-financial information

    Students assume the numbers are the real answer.

    Fix: Use scenario data such as customer churn, staff turnover or emissions. Explain how it signals future financial performance.

  • Using inconsistent or undefined ratios

    There are several versions of gearing and ROCE.

    Fix: State your definition and apply it to every period compared.

  • Concluding that a change is good or bad without checking the cause

    Students read the direction of a ratio only.

    Fix: Check for one-offs, acquisitions, policy changes and timing. A rising margin might come from a lower depreciation estimate.

  • Missing professional skills

    Students treat the question as pure technical content.

    Fix: Show scepticism, commercial insight and a clear, structured, concise communication style suited to the reader.

Worked examples

Example 1

A bank is considering renewing a loan to Veda Ltd. Year 1 and Year 2 figures: profit before interest and tax $4.0m and $3.0m. Finance costs $1.0m and $1.2m. Cash from operations $5.0m and $3.6m. Customer complaints rose from 120 to 310. Assess the position for the bank.

Show the solution
  1. Stakeholder: the lender. Decision: can Veda service and repay debt?
  2. Interest cover Year 1 = 4.0 ÷ 1.0 = 4.0 times. Year 2 = 3.0 ÷ 1.2 = 2.5 times.
  3. Cash from operations covers finance costs: Year 1 5.0 ÷ 1.0 = 5.0 times. Year 2 3.6 ÷ 1.2 = 3.0 times.
  4. Profit fell by 25% ((4.0 − 3.0) ÷ 4.0) while finance costs rose by 20% ((1.2 − 1.0) ÷ 1.0), so cover is weaker.
  5. Non-financial: complaints more than doubled (from 120 to 310). This may signal quality problems and falling future revenue, which threatens future cash flow.
  6. Limits: we do not know debt levels, security or the reason for the profit fall. Request a cash flow forecast, covenant details and an analysis of complaints.

Answer: Debt service ability has weakened: interest cover fell from 4.0 to 2.5 times and cash cover from 5.0 to 3.0 times. Rising complaints suggest further pressure. Cover is still above 1, so the bank need not refuse, but it should seek more information and consider tighter terms.

Example 2

Nira plc reports: Year 1 operating profit $12m on revenue $80m, capital employed $100m. Year 2 operating profit $15m on revenue $120m, capital employed $150m. Employee turnover rose from 8% to 19%. Explain performance to an investor.

Show the solution
  1. Stakeholder: investor deciding to hold or buy. Focus on returns and sustainability.
  2. Operating margin Year 1 = 12 ÷ 80 = 15.0%. Year 2 = 15 ÷ 120 = 12.5%.
  3. Asset turnover Year 1 = 80 ÷ 100 = 0.80. Year 2 = 120 ÷ 150 = 0.80.
  4. ROCE Year 1 = 12 ÷ 100 = 12.0%. Year 2 = 15 ÷ 150 = 10.0%. Check: 15.0% × 0.80 = 12.0% and 12.5% × 0.80 = 10.0%.
  5. Revenue grew by 50% ((120 − 80) ÷ 80) and capital employed grew by 50%, so growth was funded by new capital, but the return on that capital fell.
  6. The fall in ROCE is caused by the lower margin, not asset efficiency. Possible causes are price discounting to win sales or higher costs, and the scenario does not say which.
  7. Employee turnover more than doubled. This could raise recruitment and training costs and hurt service quality, so margin pressure may continue.
  8. Conclusion and limit: growth is positive, but returns are diluted. Ask for segment margins and the reason for turnover before buying more.

Answer: ROCE fell from 12.0% to 10.0%. Asset turnover stayed at 0.80, so the margin fall from 15.0% to 12.5% explains it. Higher staff turnover is a warning that margins may stay under pressure, so the investor should treat the growth cautiously and seek more information.

Exam tips

  • Read the requirement for the named user. Marks are tied to that user's decision, so a generic ratio list scores poorly.
  • Use a short table-like layout in your answer: figure, comparison, cause, meaning. Keep sentences brief to save time.
  • Always bring in at least one non-financial measure from the scenario and link it to future financial results.
  • Add one limitation and one further information request. These show scepticism, which earns professional skills marks.
  • Finish with a clear conclusion for the user. An answer without a judgement loses marks even when the calculations are right.

Practice questions from Analysis and interpretation of financial and non-financial information and measurement of performance

Stakeholder Information Needs and Performance Analysis in other exams

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

Stakeholder Information Needs and Performance Analysis: frequently asked questions

Who are the main users of financial statements under the Conceptual Framework?

The primary users are existing and potential investors, lenders and other creditors. They cannot ask the entity for information directly, so they depend on general purpose financial reports. Other users, such as management and regulators, can obtain tailored information.

What is the difference between financial and non-financial performance information?

Financial information is measured in money and comes mainly from the accounts, such as profit, cash flow and debt. Non-financial information covers things like customer satisfaction, staff turnover or emissions. Non-financial measures often indicate future financial results.

How should I approach interpreting financial statements in SBR?

Identify the user and decision, select relevant measures, calculate them, then compare and explain the causes using the scenario. State limitations and finish with a conclusion for that user. Interpretation earns more marks than calculation.

Do I need to memorise many ratios for this topic?

You need the core ones: margins, ROCE, asset turnover, liquidity, gearing, interest cover, EPS and dividend cover. Know how to define them, because versions differ. The exam rewards choosing and interpreting the right ones, not computing all of them.