identify three external users of accounting information and indicate two questions they might seek to answer through accounting information.
External users are existing or potential investors, creditors, analysts, financial advisers, regulatory authorities, unions, and the general public.
a
ccounting - Identify several ways in which you currently use accounting ...
Three external users of accounting information are:
1. Investors: Investors, whether they are individual shareholders or institutional investors, seek to make informed decisions about investing or divesting their money. They rely on accounting information to determine the financial health and performance of a company. Two questions they might seek to answer through accounting information are:
a. What is the company's current financial position?
b. How profitable is the company, and what is its potential for future growth and dividend payments?
2. Creditors: Creditors include banks, lending institutions, and suppliers who extend credit to a company. They need to assess the creditworthiness and repayment ability of the company before extending credit. Two questions they might seek to answer through accounting information are:
a. What is the company's liquidity position? Can it meet its short-term obligations?
b. How leveraged is the company? What is its debt-to-equity ratio, and what are the terms of its existing debt?
3. Government Agencies: Government agencies, such as tax authorities or regulatory bodies, use accounting information for various purposes, including taxation, regulatory compliance, and economic policy decisions. Two questions they might seek to answer through accounting information are:
a. Is the company accurately reporting its financial information to comply with tax regulations?
b. Is the company following industry-specific regulations or standards?
To obtain the required information, investors, creditors, and government agencies typically review financial statements, such as balance sheets, income statements, and cash flow statements, prepared by the company. They may also conduct further analysis or request additional disclosures based on their specific needs.