External users

Definition

External users are individuals or entities outside of an organization who use its financial information. They rely on this data to make informed decisions regarding their interactions with the company.

5 Must Know Facts For Your Next Test

1. External users include investors, creditors, regulators, and analysts.
2. They depend on financial statements like balance sheets, income statements, and cash flow statements.
3. Their primary concern is assessing the company's financial health and performance.
4. External users do not have access to internal accounting records or detailed operational data.
5. Accounting standards such as GAAP or IFRS ensure that financial information is consistent and comparable for these users.

Review Questions

• Who are considered external users of accounting information?
• Why do external users rely on financial statements?
• What types of documents do external users typically review to assess a company's performance?

Related terms

Investors:

Individuals or entities that allocate capital with the expectation of receiving financial returns.

Creditors:

Entities that lend money or extend credit to a business, expecting repayment with interest.

Regulators: Government agencies or bodies that oversee compliance with laws and regulations in financial reporting.