Choose A, B, C or D and explain your solution 3. External users of accounting information are: A. actual and potential investors, employees, lenders B. customers, suppliers, investors, owners, managing the business C. shareholders, managers, the government, the general public D. customers, lenders, suppliers, investors
Choose A, B, C or D and explain your solution
3. External users of accounting information are:
A. actual and potential investors, employees, lenders
B. customers, suppliers, investors, owners, managing the business
C. shareholders, managers, the government, the general public
D. customers, lenders, suppliers, investors
External users: External users are the persons who are outside the organization but make use of accounting information for their purposes. They are:
1. Creditors.
2. Financial Institution.
3. Investors.
4. Customers.
5. Government.
6. Tax authorities and other regulatory bodies.
7. Researchers.
8. General public.
Customers: Customers of the company see the financial viability of the company through various ratios and past performance of the company. It will be useful for maintaining a long-term relationship with the company.
Lenders: Lenders, financial institutions will require financial statements to analyze the credibility of the company whether their loaned money can be repaid by the company within time. This can be analyzed by looking at the debt-equity ratio, liquidity ratios of the company.
Suppliers: Suppliers need to satisfy themselves regarding the sustainability and credibility of the company whether it is safe to extend supplies to the company.
Investors: Investors or shareholders are the most important users of the annual report. These are the persons who will be willing to understand how the business is running, how the company is performing, and whether their invested money is being properly utilized or not, and providing them a good return.
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