Question

why investor are interested in accounting information?

Answer 1

HEYA!!!


HERE IS YOUR ANSWER,


> Investors are interested in financial accounting for the sole purpose of being able to identify if the company is currently profitable and will be profitable in future accounting cycles/ years.

> The reason for this is they want to ensure the company is profitable so they can make their money back and hopefully receive dividends.

> If a company fails, the investors lose their money.

> Creditors are also interested in financial accounting for the same reasons but a company has to pay them back.


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Answer 2

Answer:

Financial statements are used by investors to obtain valuable information for company valuation and credit analysis. As a result, it is critical to understand how business accounting is performed and which principles govern financial statement preparation.

Explanation:

These are individuals or groups who put their money into a business. They are divided into the two categories listed below;

Actual investors/owners/shareholders -

• These are people who have already put money into a company or organisation.
• They require accounting information from the organisations in which they invest in order to determine whether their funds are well invested, increasing, and will earn a dividend or return.
• They monitor the financial status of the organisation and determine whether or not resources are being used effectively through the auditors they appoint.

Potential/prospective Individuals-

• Potential/prospective Individuals considering investing or purchasing stock in a company are referred to as investors.
• They examine financial statements to determine whether the company has the potential for growth, survival, and profit.  
• They accomplish this through the use of financial analysts.
• They want to know if investing is worthwhile and if they will see a return on their investment.

Hence, accounting knowledge assists investors in determining the value of assets, understanding a company's financing sources, calculating profitability, and estimating risks embedded in a company's balance sheet.

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