Since financial ratios can provide insights into a company’s health and financial results, each of these groups would be interested in all financial ratios. However, it is reasonable that each group would be particularly interested in the ratios that most directly reflected their interests. (Note that much of what these stakeholders are interested in is not measured by financial data, hence cannot easily be reduced to financial ratios.)
a. Managers? Ratios such as asset utilization, that describe their area of responsibility.
b. Customers? Ratios that point toward the company’s ability to continue to produce, service, and improve its products and services.
c. Shareholders? Ratios that point toward financial results, such as profitability, financing choice, and market value.
d. Creditors? Ratios that measure the company’s amount of and ability to service debt.
e. Employees? Ratios, such as profitability, that point toward the company’s ability to provide wages and employee benefits.
f. Governments? Ratios, such as profitability, that point toward the company’s long term health and ability to provide jobs and pay taxes.
g. Neighbors? Ratios, such as profitability, that point toward the company’s ability to contribute toward the community.
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