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Users of Accounting Information

  • Investors: Existing and potential investors use accounting information (primarily financial statements) to evaluate a company's performance and make informed investment decisions. This includes mutual funds analysis.
  • Lenders Creditors): Banks and other financial institutions use accounting information to assess creditworthiness before lending money and monitor borrowers' financial health. This includes:
  • Banks
  • Leasing companies
  • Companies offering hire-purchase agreements
  • Credit Rating Agencies: These agencies use financial data to assess credit risk and assign credit ratings, which influence investment and lending decisions.
  • Suppliers: Suppliers often extend credit to their customers. They rely on accounting information to evaluate the customer's ability to repay debts.
  • Government Agencies: Various government bodies use accounting information for different purposes:
  • Tax Authorities: To determine the correct amount of taxes owed by businesses.
  • Planning Authorities (e.g., NITI Aayog in India): To monitor economic growth and industry performance and to inform policy decisions.
  • Employees and Unions: Employees, prospective employees, and labor unions are interested in a company's financial health to assess job security, potential salary increases, and benefits.
  • Customers: For large purchases or long-term contracts, customers rely on accounting information to assess their suppliers' stability and long-term viability. The example given is the Indian Air Force evaluating the financial health of aircraft manufacturers before making a purchase.
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