- Okay, bookkeeping is fun.
Debits and credits, they're the best.
Transaction analysis and posting
are the height of entertainment,
and all of this leads eventually
to the financial statements,
but really, who uses the financial statements?
- Who?
Who, everyone does, or at least everyone
who wants to be informed.
Key users of financial statements are lenders and investors,
the people who provide the capital
to a business so that an entrepreneur
can turn her or his dreams into reality.
- [Man In Blue Shirt] But lenders and investors
aren't the only external users of financial statements.
For example, suppliers use a company's financial statements.
If I'm going to sell to you on credit,
then I want to know if you're going to be able to pay me.
- So if you're considering entering
into a long-term significant supplier relationship,
where you're going to be selling
on credit to another company,
the first thing you're going to do
is get their financial statements,
do a little analysis just to see
if they're going to be able to pay you back.
- [Man In Blue Shirt] Customers also use
a company's financial statements.
Anybody who enters into a long-term relationship
with a business wants to know if that business
is going to be around in the future.
- Employees should also look
at a company's financial statements.
Employees have long-term relationships with companies.
- Before leaving one job and taking another job
with a different company, employees should look
at the financial reports of the new company.
- Is this a strong company?
Do they have a strong track record?
Can I count on them?
Are they going to be here in the long term?
Are they financially viable?
- [Man In Blue Shirt] Now, competitors also use
a company's financial statements.
Do you think Coke wants to see
the financial accounting reports of Pepsi?
Of course, they do.
Do you think Walmart wants to see
the financial accounting reports of Target?
Competitors can use a company's financial statements
to see its strengths and its weaknesses.
- [Man In Glasses] Government agencies are also users
of financial accounting reports,
banks, insurance companies, public utilities
are regulated by the government.
Accordingly, companies in these industries
must provide financial accounting reports
to the relevant government agencies.
- [Man In Blue Shirt] Politicians and their staff
also look at financial accounting reports.
For example, if I as a politician
want to make a political argument against, say,
high profits in the oil and gas industry,
I pull out exhibit A, their financial reports.
- Or if I'm a politician who wants
to protect, say, the textile industry in my state,
I pull out the financial reports
of some major textile businesses
to show that their profits are going down.
- [Man In Blue Shirt] Now, news reporters
also use financial accounting reports.
A basic use is to provide simple background information.
For example, if I'm writing a story about Apple,
I use the company's financial statements
to be able to tell my readers
about the company's net income, assets,
and amount of income taxes paid.
- News reporters also use use financial reports
to trigger investigations.
Let's say that a company just announced
that their profits have gone down by 70%.
That financial accounting report
could trigger an investigation by an enterprising reporter
who would say, well, why did their profits go down by 70%?
- Turns out, lots of people use financial statements,
investors, lenders, suppliers, customers,
employees, competitors, government agencies,
politicians, and news reporters.
- And from now on, hopefully you will
be in the set of people who are comfortable
using the financial statements
that are created through a company's bookkeeping process.