Who are the internal and external users of a company's financial statements and for what purpose is this information used?

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Originally Posted by vicfox

Who are the internal and external users of a company's financial statements and for what purpose is this information used?

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Who are the internal and external users of a company's financial statements?

Internal users are the finance department and everyone inside the company that uses the company financial statements. External users are the people that use the company's output of financial statements for various reasons like business customers or students.

And who inside the company is the finance department going to give these to? They don't just keep them for themselves.

As for external, you're missing a couple of really big ones. There's only one way in which students use financial statements. Any private company doesn't go around handing students their statements cause they're none of your business. Only publicly traded companies do that, cause they're public and now they're everyone's business. :) But since you came up with students -- I'll assume you've been using those statements coming out of public companies. And what is a really big group of people that uses those that you're missing? And you're missing another important user. Think balance sheet.

1. Internal users are those who plan, organize, and run businesses and include managers, supervisors, directors, and company officers.
To assist internal users, accounting provides internal reports. Examples include financial comparisons of operating alternatives, projections of revenues and expenses from new sales campaigns, and forecasts of cash needs for the next year.

2. External users work for other organizations but have reasons to be interested in the company's financial position and performance, and include investors, creditors, bankers an regulatory bodies.

Investors use the financial accounting information to evaluate a company's performance. They would look for answers to questions such as “Is the company earning satisfactory profit?” They want to monitor return on investment.

Creditors use financial accounting information to evaluate a company's credit risk. They would look for answers to questions such as “Can the company pay its debts as they come due?”