ACCA Applied Knowledge · Financial Accounting · Stakeholders' needs
A bank is considering whether to grant a five-year loan to a company. Which of the following best describes the main information need of the bank as a user of the company's financial statements?
The bank's main need is information about the company's ability to generate cash to pay interest and repay the loan when due. Lenders focus on liquidity and solvency, not on market expansion, management remuneration or community programmes, which matter more to other user groups.
- AInformation on the company's ability to generate cash to pay interest and repay the loan when dueCorrect
- BInformation on the company's plans to expand into new markets and the resulting increase in market share
- CInformation on the pay levels and bonus schemes of the company's senior managers
- DInformation on the company's environmental policies and community involvement programmes
Explanation
Lenders such as banks are mainly concerned with whether the borrower can pay interest as it falls due and repay the capital at maturity, so they focus on liquidity, cash generation and solvency. Information on expansion plans, management pay and community involvement is of secondary interest to a lender, and the question asks for the main need.
Did you get it right without looking?
One question tells you little. A timed set on Stakeholders' needs shows your real accuracy, how long you take and where you lose marks.
More Stakeholders' needs questions
- Which statement best describes the objective of general purpose financial reporting under the Conceptual Framework?
- Which of the following is information that general purpose financial reports are intended to give users, according to the Conceptual Framewo…
- An investor is deciding whether to buy more shares in Orion Co. Which ratio would be most relevant to the investor's assessment of the retur…
- Which of the following users is most likely to have the power to demand management information tailored to its own needs, rather than relyin…
- Kestrel Ltd's finance director produces a weekly report for the board showing sales by region, cash balance and orders received to date. Whi…
- Which one of the following statements about the time orientation and scope of information is correct?