Who is considered an external user of financial statements?
External users of the financial statements will use information reported in the financial statements to determine whether engaging in business with the company would be beneficial. Internal users would use the financial statements to make decisions that impact the operations of the business.
External users of the financial statements will include:
1) Regulatory agencies: Regulatory agencies that would require financial statements to evaluate the company’s conformity with regulations and for determining price levels in specified industries that have more strict regulation.
2) Investors: Investors that require information when deciding on whether to invest in the financial reporting entity.
3) Creditors: Creditors would use the financial statements to assess the liquidity or solvency of debtors when they contemplating issuing a loan or specific lines of credit.
4) Financial analysts: Financial analysts and stock exchanges that use financial statement information to evaluate whether to invest in or accept the stock price listing.
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Who has a direct interest in financial statements and who has an indirect interest in financial statements?
Users with a direct interest will generally have an economic interest in the specific entity, while users with indirect interests may not. The visual below summarizes who is typically considered a direct and indirect user of financial statements.
Who are the primary users of financial statements?
Primary users of the financial statements are considered existing and potential investors, creditors, and lenders. Primary users obtain financial statement information and allow them to understand the overall health of the company such as its net cash flow status etc. Such users make decisions related to purchasing or selling interest in these reporting entities. Other […]