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Business Accounting And Financial Information

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Question: Discuss about the Business Accounting and Financial Information.     Answer: Introduction Accounting is considered as the measurement that helps in communicating and processing the financial information regarding the economic entities. According to Garrison, Noreen and Brewer (2012), accounting is known as the language of business that helps to measure the results of the economic activities of a firm and it also conveys the particular information to several users like creditors, investors, regulators and management. Therefore, it can be said that accounting is an important practice for any business. In addition to this, it can be noted that the accounting helps to operate the business and also to run it in a profitable way. The strong financial position of a firm is dependent on the calculation of an accountant. Here a firm that is enlisted in the stock exchange of the country has been selected in order to discuss the way by which the financial information meets the requirement of various non-management external users of the particular firm. In this report, the company Tesco Plc has been selected in order to analyze whether the financial information found in the annual report of the firm meets the needs of five different non-management external users. Moreover, the qualitative features that make the information of the financial reports useful to the users have also been discussed (Hoggett 2012). Company Background The company Tesco Plc is a public limited company, enlisted in the London Stock Exchange as TSCO. This company belongs to the retail sector that was founded about 98 years ago that is the year 1919 in London, England by the founder Jack Cohen. Therefore, it can be said that Tesco Plc is a British multinational grocery and a general merchandise retailer. This particular firm is considered as the third largest retailer across the world on the basis of profit measurement. Tesco Plc is even counted as the second largest retailer across the world on the basis of the measurement of the revenue. The particular firm has around 6814 stores across 12 countries including Europe, Asia, Hungary, Ireland, Thailand and Malaysia (Tesco plc. 2016). As per the year 2015, there are more than 500,000 employees within the organization across the world. The main products of the company Tesco Plc include – the supermarket, superstore and hypermarket.     Usage of the Financial Information by Non-management External Users   In this report, it has been discussed that whether the financial information meets the requirement of five different non-management external users or not. The non-management external users are defined as those stakeholders who are not familiar with the management of the firm. For the particular company Tesco Plc, the five different non-management external users of accounting information include – investors, creditors, members of Non Profit organizations, government of the country and the research scholars (Horngren, Harrison and Oliver 2012). Creditors – For the company Tesco Plc, the creditors implies the suppliers of services and products on credit, the banks, the lenders of money generally who want to know about the financial position of the particular company. This is concerned with granting credit and/ or providing loans to the concerned organization (Warren, Reeve and Duchac 2012). The creditors of the organization Tesco Plc requires accounting information regarding quick assets, current assets and the current liabilities that are available from the financial statements of the organization like – the balance sheet, comprehensive equity statement, cash flow statement and income statement. Investors – For the organization Tesco Plc, the investors intend to invest a lot of money in a firm in order to know the financial condition of the organization. The investors invest in the organization in order to earn a higher amount of return (Fields 2011). Therefore, it is a common factor that the investors will investigate about the financial position of the organization before investing. For this, proper analysis of the financial condition of the firm is an essential factor, as strong financial condition of the firm Tesco Plc indicates that the company will be able to manufacture and produce more, and this will increase the total sales volume of the company. With the increase in the sales volume, the profitability of the firm also increases and this indicates that the firm will provide higher amount or return or higher rate of return to its investors through percentage of dividend (Penman 2011). The investors thus require accounting information that will guide them to evaluate the performance of the past and also to predict the future prospects of the firm that is Tesco Plc. Members of Non Profit Organization – The non-profit organizations include the hospitals, schools, clubs, colleges and many more (Libby, Libby and Short 2011). All these non-profit organizations need to gather the accounting information regarding the company Tesco Plc in order to gather knowledge regarding the methods by which the contributed funds of the organization are utilized. This particular information helps the non-profit organizations to make decisions about the future support from the particular company Tesco Plc.             Government – The government of a country intends to keep detailed information regarding the sales and revenues of a company and the percentage of earnings from selling. The main objective behind this is to earn a certain amount of taxation from the volume of sales or from the part of income or from the profit percentage of the organization (Feldmann and Rupert 2012). Therefore, in case of the organization Tesco Plc, the government of the country U.K. keeps a strict eye on the sales, revenue, earnings and profit percentage of the organization with the aim to charge a higher amount of taxation and also to earn a higher amount from the particular firm. Thus, it can be said that the non-management sector like the government of the country also requires the financial information regarding an organization for running the country and for maintaining a stable economic condition within the country. For instance, the income tax returns of the organization are calculated based on the financial reports of the particular firm. Therefore, it can be said that the income tax is calculated based on the information gathered by the government of the country from the accounting information of the firm.       Research Scholars – The research scholars perform the analysis of the financial statements of the firm in order to understand the financial position of the organization in the present competitive market (Pride, Hughes and Kapoor 2012). Similarly, the research scholars also analyze the financial statements of the organization Tesco Plc in order to determine and understand its financial situation and its financial strength. The accounting information provided in the annual report of the company Tesco Plc helps the research scholars to make a study regarding the financial situation of the firm into financial operations of the specified organization.   Qualitative Characteristics of the Financial Report The store of Tesco Plc is authentically trying to improve its performance. The evidence regarding this progress has been found, as the consumers feel better by overall shopping in Tesco. The spontaneous work for servicing its consumers, the vital importance provided by Tesco Plc to the local community and relatively the lower prices of the products of the organization along with well stocked shelves and enough staffs make a great difference of the particular company with other firms of the similar sector (Epstein and Lee 2012). The mission of the firm is to become the champion for the consumers and to help each one who shops from the firm. The firm Tesco Plc makes the life of the people easier and also makes the way of living easier for every consumer. It has been found that at the end of the year 2015, the numbers of colleagues of the organization Tesco Plc increased to 517,802. The total numbers of shops opened across the world are 7,817. It has been found that over 80 million shopping trips take place within the organization in each week. It has been noted that 685,000 numbers of children came to know about the particular organization and its food through Eat Happy Project of the firm. The particular organization intends to protect all its customers from adulteration and fraudulence activities. Thus, Tesco Plc protects and strengthens its financial position such that the management can maintain the flexibility of investment for better shopping trip for its consumers. The company has started reviewing all its costs related to the business from the last October, so that the additional costs of the firm can be reduced (Bragg 2013). The company even took significant decision regarding not
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