**External Users of Accounting Information**

External users of accounting information are individuals or entities who are not directly involved in the day-to-day operations of a business but rely on financial statements and other accounting reports to make informed decisions. These users have a vested interest in the financial health and performance of the organization. Here are two examples of external users and how they utilize accounting information:

1. **Investors**
Investors are individuals or institutions that provide capital to a company in exchange for ownership rights, such as shares of stock. They rely on accounting information to assess the financial performance and potential risks of an organization before making investment decisions. Here's how investors use accounting information:

- **Financial Statement Analysis**: Investors analyze financial statements, including the income statement, balance sheet, and cash flow statement, to evaluate the profitability, liquidity, and financial stability of a company. They look for key financial ratios, such as return on investment (ROI) and debt-to-equity ratio, to assess the company's financial health and growth prospects.

- **Earnings Reports**: Investors closely monitor earnings reports to assess a company's profitability and future earnings potential. They compare the reported earnings to market expectations and industry benchmarks to gauge the company's performance and growth trajectory. Positive earnings surprises may attract more investors, while negative surprises can lead to share price declines.

- **Audited Financial Statements**: Investors value audited financial statements as they provide an independent and objective assessment of a company's financial records. Audits help ensure the accuracy and reliability of financial information, giving investors confidence in their investment decisions.

2. **Creditors**
Creditors are individuals, financial institutions, or suppliers who provide goods or services on credit to a company. They use accounting information to evaluate the creditworthiness and ability of a business to repay its debts. Here's how creditors use accounting information:

- **Financial Ratio Analysis**: Creditors analyze financial ratios, such as the current ratio and debt-to-equity ratio, to assess a company's liquidity and solvency. These ratios help creditors determine the company's ability to meet its short-term and long-term obligations and make timely debt payments.

- **Creditworthiness Assessment**: Creditors review financial statements and credit reports to evaluate a company's creditworthiness. They assess the company's financial stability, payment history, and overall financial health to determine the credit terms, interest rates, and credit limits they are willing to extend.

- **Collateral Evaluation**: Creditors may also assess the value and quality of a company's assets to determine the collateral that can be used to secure loans or credit facilities. This evaluation helps protect the interests of creditors in case of default by the borrower.

In conclusion, investors and creditors are two important external users of accounting information. They rely on financial statements, earnings reports, and other accounting information to make informed decisions regarding investments, credit extensions, and risk assessments. Accounting information provides these users with a comprehensive picture of a company's financial health, performance, and potential risks, enabling them to make sound financial decisions.

Financial accounting information isused for decision making by externalusers, such as investors and creditors. Managerial accounting information isused for decision making by internal users, such as the management or operational managers