Accounting

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Identify three potential users of accounting reports.

 

The three potential users of accounting reports are managers, investors, and creditors.

  • Explain why management would be interested in accounting reports.

 

Management would be interested in accounting reports because they want to evaluate the past performance and make decisions on how they can improve their business in the future. Accounting reports are used to provide some feedback information to the managers so they can make a decision on how the money is going to be spend for the business.

  • Explain why investors would be interested in accounting reports.

 

Investors would be interested in accounting reports because the reports are able to show the economic or financial information about the business. So, without accounting, stock markets would not be able to function. The accounting information is used to help investors determine which stocks to sell or buy, and to help owners monitor the business results of their investments.

  • Explain why creditors would be interested in accounting reports.

 

Creditors would be interested in accounting reports because it has to make a choice on where to loan the money and it uses the reports to determine to whom the loan will be made to and on what terms (interest rate, time period, and collateral). Also, the bank would like to evaluate the likelihood of the borrower repaying the loan and if an enterprise will pay its debts.

  • Identify two items of information an investor would like to know about a business.

 

Two items of information an investor would like to know about a business are those internal to the enterprise (managers) and external users (investors and creditors).