Which of the following financial statement users would is for a forecast of the company’s product demand to have sufficient product available to support compare sales ?
Multiple Choice
Suppliers
Creditors
Investors
Employees
The correct answer and explanation is:
The correct answer is Suppliers.
Explanation:
Suppliers would ask for a forecast of a company’s product demand to ensure they can provide the necessary materials or products to support the company’s sales. A company’s ability to meet consumer demand directly affects its ability to fulfill orders. Suppliers, as external parties providing goods or services to the company, need to know how much the company will need to order from them in order to keep the supply chain running smoothly. By understanding future demand forecasts, suppliers can plan production, manage their inventory levels, and ensure that they can meet the company’s future needs on time.
This forecast would allow suppliers to adjust their operations to match the anticipated demand. If demand is expected to be high, suppliers may need to ramp up production or source additional resources to meet the company’s needs. Conversely, if demand is expected to decline, suppliers might scale back their production to avoid overstocking. Without such forecasts, suppliers may face supply shortages or excess inventory, which could disrupt both their operations and those of the company they supply.
Creditors, investors, and employees, while they may be interested in the company’s overall financial health or performance, typically would not need such a detailed product demand forecast. Creditors and investors focus more on financial metrics such as profitability, solvency, and liquidity, while employees are concerned with the stability and profitability of the company but are less involved in the supply chain logistics or demand forecasting. Thus, suppliers are the most likely users of financial statements who would request such information to ensure they can meet product demands efficiently.