Objectives and Users of Financial Statements

The primary objective of Financial Statements is to communicate in general terms the financial performance and position of the institution and how well the institution is achieving its stated objectives. The following are the typical SACCOs‟ stakeholders and the broad areas of analysis that interests them:
 Board members: The board members would like to interpret /analyse financial statements and operational statistics to better
perform their key duty of monitoring management performance and steering the SACCO towards attaining its institutional objectives, which usually includes financial sustainability.
 Management: They measure their performance with a view to improving it. They would also like to study, identify and address areas of good, average and poor performance.
 Membership: These assess the prospects of receiving dividends and capital growth and the overall safety of their investment and savings in the SACCO.
 Regulatory bodies: These would like to be convinced that the SACCO is run professionally. They would also like to know whether
the institution is financially and operationally sound and that it is run in such away as to maintain the soundness and safety of assets, for continuity.
 Creditors: The creditors would like to be assured that the SACCO will be able to pay both interest and principal. They are concerned with short term liquidity (ability to meet current financial obligations as they become due) long term solvency (ability to generate enough cash to repay long term debts as they mature) as well as the levels of debt in relation to equity.
 Donors: The donors would like to know whether the SACCO will be able to provide the service on a sustainable basis and create impact while meeting grant or loan requirements and conditions.
Various SACCO stakeholders require information to assess the extent to which the institution objectives have been attained. Accounting through financial statements provides most of this information. Best practice in microfinance stipulates that good financial management and financial analysis is the basis for successful and sustainable microfinance operations.
The quality of financial analysis depends on the quality of the information that has been recorded for analysis and this information is derived largely from the accounting system.

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One Response

  1. Reblogged this on Kenya's Co-operative Movement and commented:

    This would be my main blog henceforth on matters co-operatives in Kenya.

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