Importance of accounting information for prospective inveators
Answers
Importance of accounting information for prospective investors :
Those who are interested in investing money in an organisation are interested in knowing the financial health of the organisation to know how safe the investment already made is and how safe their proposed investment will be.
To know the financial health, they need accounting information which will help them in evaluating the past performance and future prospects of the organisation.Thus, investors for investments decisions are dependent upon accounting information included in the financial statements.
They can know the profitability and financial position of the organisation in which they are interested to make that investment by making a study of the accounting information given in the financial statements of the organisation.
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Accounting information refers to the financial statement generated through the process of bookkeeping ,use of which help the user to arrive at decision .The financial statement so generated are the income statement ,profit and loss account and the position statement .
➡️ Information relating to profit .
➡️ Information relating to financial position .
☑️ Investment involve risk and also the investor do not have direct control over the business affair . Therefore they rely on the accounting information available to them and seek answer to question such as -What if the earning capacity of the enterprise and how safe is there investment?
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