Who are three primary users of financial statements?

The correct answer highlights the three primary users of financial statements: investors, lenders, and other creditors. These groups rely on financial statements to make informed decisions regarding their financial interests in the entity.

Investors utilize financial statements to assess the profitability and growth potential of a company, guiding their investment decisions. Potential and current investors analyze key metrics such as earnings, revenue trends, and overall financial health to evaluate whether to buy, hold, or sell stocks.

Lenders make use of financial statements primarily to assess credit risk. These documents provide insights into a company’s ability to repay debts and manage cash flows effectively. Lenders analyze metrics like debt-to-equity ratios and cash flow statements to determine the likelihood of obtaining repayments as scheduled.

Other creditors also rely on financial statements to evaluate the financial stability of the entity, which influences their decisions regarding extending credit or making specific agreements with the company. They assess the organization's liquidity and overall financial position to minimize their risks.

In contrast, while managers, employees, suppliers, competitors, regulators, auditors, government agencies, media, and community organizations might have interests in financial statements, they do not primarily drive the overall purpose and frequency of these reports, which is predominantly intended for investors, lenders, and creditors.