# 3.1 Who needs ratios? The external stakeholders’ perspective

Ratios are a powerful tool for an organisation’s external stakeholders (be they suppliers, lenders, prospective investors or competitors). It is not always easy to access all the information you need about an organisation in order to analyse it. Organisations do not disseminate certain internal information, partly to protect any strategic advantage they may have over their competitors. Disseminating too much information can be advantageous to competitors, who will then have a clearer idea of the strengths and weaknesses of rival organisations. As a consequence, all organisations, private and not-for-profit, tend only to disclose information that legislation, regulation and accounting standards require. Ratio analysis, however, enables scrutiny of financial statements in order to better understand the health and performance of organisations.

Figure 5 provides an explanation of the information and analysis needs of suppliers, lenders, prospective investors and competitors as important external stakeholders. Click on each heading to find out more about each one.

Figure 5 Financial information needs of external stakeholders

OpenLearn - Financial statement analysis and interpretation
Except for third party materials and otherwise, this content is made available under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 Licence, full copyright detail can be found in the acknowledgements section. Please see full copyright statement for details.