Describe how accounting information helps shareholders and lenders to make decisions concerning the operations and performance of the business entity?
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Accounting information can be used by shareholders and lenders to look at an entity's financial position and whether it is viable to invest or lend to the entity. If the performance of a company has been poor and there is no indication of this improving, a potential shareholder will not invest in the company as there is nothing to gain from the investment and a lender will not loan money to the company due to the risk of not seeing that money again. If however, the company is turning a profit, indicates that it will continue to do so in the future and has a great many assets, both shareholders and lenders will consider investing in the company in line with their personal interests.
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