Briefly discuss the informational needs of any three external users.
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There are various external users of accounting who need accounting information for decision making, investment planning and to assess the financial position of the business. The various external users are given below.
1. Banks and other financial institutions− Banks provide finance in form of loans and advances to various businesses. Thus, they need information regarding liquidity, creditworthiness, solvency and profitability to advance loans.
2. Creditors− These are those individuals and organisations to whom a business owes money on account of credit purchases of goods and receiving services; hence, the creditors require information about credit worthiness of the business.
3. Investors and potential investors− They invest or plan to invest in the business. Hence, in order to assess the viability and prospectes of their investment, creditors need information about profitability and solvency of the business.
1. Banks and other financial institutions− Banks provide finance in form of loans and advances to various businesses. Thus, they need information regarding liquidity, creditworthiness, solvency and profitability to advance loans.
2. Creditors− These are those individuals and organisations to whom a business owes money on account of credit purchases of goods and receiving services; hence, the creditors require information about credit worthiness of the business.
3. Investors and potential investors− They invest or plan to invest in the business. Hence, in order to assess the viability and prospectes of their investment, creditors need information about profitability and solvency of the business.
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