external-users-of-accounting-information

In 100 words or more reply to statement below about external users of accounting information

In addition to publicly available securities like stocks and bonds, external lenders will also use the financial statements to decide whether to lend to or finance the company. The external lenders will also use physical visits to ensure the “concrete-ness” of the business, but they will focus on the financial statements. These statements can show two of the most important things to any lender. One is the soundness and consistency of the business. If they are performing well, the lenders will know where to look on the statements to get comfortable with the income. Another is the net assets, because if for whatever reason the borrower cannot pay back its debts, the lender will want to make sure it has significant assets to cover its potential receivable.