The financial statements are suggested as the intermediate component between the reporting entity and report users in the reporting process. The major objective is argued as to provide useful information about the reporting entity'I 1/4 financial performance and financial position to a wide range of users. Thus they can make economic decisions as well as assess the stewardship of the entity'I 1/4 management. Generally, financial statements comprise a balance sheet, a profit loss account and a cash flow statement. The balance sheet illustrates information about the business'I 1/4 financial position while the profit and loss account tells the performance and cash flow statement indicates the liquidity. In this essay, I'm going to focus on how this objective is met by the J Sainsbury plc.

There are a wide range of user groups are interested in these statements, which includes the management, investors, employees, lenders, suppliers, customers, government and the public. Most of their needed information can be obtained from the report. The management could be argued as the most demanded statement users as they are involving in the day-to-day business. They have to take responsibilities on making all kinds of financial decisions by looking at the business'I 1/4 performance.

However, the information in the annual statements would be too general and out of date for them. The specialised management accounting information could be more useful for them to meet the specific needs. With respect to the investors, which are shareholders and potential shareholders, they need information to help them to decide whether to buy new shares, hold or sell the current shares. The business'I 1/4 financial performance and financial position are particularly important for them to make economic decisions or assess the stewardship. These information are given in details in the operating and financial review. For example, the dividend for each share in 2003 was 15.

58 p, which is the highest in the last 9 financial years. And an increase of 10. 8% on underlying profit before tax was also made by the company. A continuing double-digit growth trend on profit was also suggested. Apart from that, a lot of information is given such as the basic earning per share, capital expenditure, the operating status of Sainsbury'I 1/4 bank etc. Investors could see a very strong and positive financial performance and position of the business.

A further investment is likely to be made by investors under such a situation. Employees are interested in information the ability of the entity to provide remuneration, retirement benefits and employment opportunities. Furthermore, they would be interested in both the current financial stability and the longer-term financial viability of the business. In the note 8 to the financial statements, it shows that the wages and salaries paid was? 739 m. Compare with last year'I 1/4 figure? 735 m, a stability of provision of remuneration could be seen. Pension costs of? 3 m in 2003 and? 1 m in 2002 can also show the continuing care from the entity after the employees retired.

A survey from the annual review tells that 40% of the employees are also the shareholders of J Sainsbury plc. It means that a big proportion of employees have linked themselves very closely with the business. It'I 1/4 a very strong evidence showing the trust of many employees on the business'I 1/4 future viability. However, employees would require more up-to-date information such as conditions and terms of employment and job security etc. Lenders are recognised as loan creditors in most cases when dealing with a big company like Sainsbury plc. Banks make up most of this group.

They are offering long, medium and short-term loans to the businesses. They would wish to assess the economic stability and vulnerability of the borrower. Current and potential loan creditors are particularly concerned on whether to advance further credit or get their money back. From the balance sheet, an increase in capital from? 909 m to? 072 m might influence the lenders to provide a further loan on the business. The good liquidity suggested in the cash flow statement has the same effect. But normally, special reports such as cash flow projections are needed to show how the business plans to repay, with interest, the money borrowed.

Suppliers need information about whether to sell products or services to the entity which is relating the entity'I 1/4 financial stability. It could be seen from the profit and loss account as described above. Another information they are interested in is the entity'I 1/4 ability to meet its short-term liabilities according to its cash flow. From the group'I 1/4 cash flow statement, an increase of net cash from? 5 m in 2002 to? 83 m can be seen. Moreover, the net debt increases from? 156 m to? 404 m.

It shows great cash liquidity which might boost the further investment from suppliers. In addition, Sainsbury argues they are committed to developing and maintaining mutually beneficial relationships with their suppliers. A stable relationship with the retailer is also demanded by the suppliers. Customers are mainly interested in the stability of the entity to offer goods and services with high quality, constant price and conditions of sale. By looking at the company'I 1/4 strong financial performance and high liquidity, customers might put more trust on Sainsbury'I 1/4 when dealing with them. Further information given on the website such as their promise on food safety might also interest the customers.

Governments make their economics decisions by evaluating the performances of all businesses in different sectors. A taxation of? 24 m is reported in the cash flow statement. Government could tell if that is the right amount the entity should pay according to their sales revenue. Comparing to the performances of the whole retailing industry, government need to decide whether they should set up a new taxing rate to remain the current market neutral. They will also analysis the company'I 1/4 sales figure to monitor whether suitable prices were charged to customers. Finally, financial statements provide information on the contribution to local economy as a public interest.

For example, offering employment opportunities to the community by expanding the business. In the operating and financial review, it suggests that 39 new stores were opened in 2002/2003. A relative job offering could be argued from that. Other businesses might also pay attention to the new stores since the stores could benefit some of the exciting businesses while challenge some other local businesses. To conclude, the annual report and financial statements of J Sainsbury plc provides very useful information for these user groups to make their economic decisions or assess the stewardship. However, it also has some limits.

Some of the information is too general for a specific user group to make a developed judgment. And these statements could be out of date if information is required under a short time. Although the annual statements provide a excellent link between the reporting entity and report user, the user couldn'I? totally rely on the statements if they want to judge the business to a further extent. f"U Pauline Weet man, Financial Accounting: an Introduction, 3 rd Edition, 2003 f"U John Arnold, Tony Hope, Alan Southworth and Linda Kirkham, Financial Accounting, 2 nd edition, 1994.