Stakeholder

Definition

A stakeholder is any individual or group that has an interest in or can be affected by the financial performance and activities of a business. Stakeholders include shareholders, employees, customers, suppliers, creditors, and the community.

5 Must Know Facts For Your Next Test

1. Stakeholders rely on financial statements to make informed decisions about their interests in the company.
2. Differentiating between internal (e.g., employees) and external (e.g., investors) stakeholders is crucial for understanding their varying needs.
3. Financial performance indicators such as net income, cash flow, and equity are critical data points for stakeholders.
4. The income statement, balance sheet, statement of owner's equity, and statement of cash flows provide essential information to stakeholders.
5. Effective communication with stakeholders through accurate and transparent accounting practices is vital for maintaining trust and investment.

Review Questions

• Who are considered internal stakeholders in a business?
• Why do external stakeholders rely on financial statements?
• What types of financial information are most important to creditors?

Related terms

Shareholder: An individual or entity that owns shares in a corporation and has an interest in its profitability.

Income Statement:

A financial document that reports a company's revenues and expenses over a specific period.

Balance Sheet:

A financial statement that provides a snapshot of a company's assets, liabilities, and equity at a specific point in time.