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Fabm Lesson 3

The document outlines the users of financial information, categorizing them into internal and external users. Internal users include investors, management, and employees who utilize financial data for decision-making and assessing job security. External users consist of financial institutions, government entities, potential investors, and customers who rely on financial information for credit assessment, compliance, and supplier stability.

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17 views1 page

Fabm Lesson 3

The document outlines the users of financial information, categorizing them into internal and external users. Internal users include investors, management, and employees who utilize financial data for decision-making and assessing job security. External users consist of financial institutions, government entities, potential investors, and customers who rely on financial information for credit assessment, compliance, and supplier stability.

Uploaded by

krishamarie.buenavente
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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FABM LESSON 3 – USERS OF FINANCIAL INFORMATION

INTERNAL USERS
- The primary users of financial information who are inside the reporting entity and are
directly involved in managing the company’s daily operations.
- They are the decision-makers who make the strategic and operational decisions for the
company.
 INVESTORS/OWNERS
 PARTIES provide the financial resources to keep the business going
 MANAGEMENT – Organizational managers use financial information to set goals for
their companies.
 EMPLOYEES – They are not directly involved in the decision-making of the company but,
nonetheless, they are interested in the financial information of the company to
determine if they have a future in the company.

EXTERNAL USERS
- Secondary users of financial information who are parties outside the company
- They may not be directly involved in the company’s operations but their decisions may
significantly affect the business entity.
 FINANCIAL INSTITUTIONS/CREDITORS – Financial institutions use financial information
before extending credit to determine the capacity of the business organization to pay its
obligation and their interest at the appropriate time.
 GOVERNMENT – Financial information is important for tax purposes and in checking of
compliance with Securities and Exchange Commission (SEC) requirements.
 POTENTIAL INVESTORS/CREDITORS – Before making an investment or extending credit,
potential investors or creditors may not only be interested in the company’s current
financial position and results of operations, but also in the company’s financial history.
 CUSTOMERS – For assessing the financial position of its suppliers which is necessary for
them to maintain a stable source of supply in the long term.

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