Who primarily uses the information provided by financial reporting?

Financial reporting is designed to provide relevant information about the financial position and performance of a company to a wide range of external users who make decisions based on this information. This includes investors, creditors, analysts, regulatory agencies, and other stakeholders who need to assess the company's profitability, financial health, and cash flows to make informed decisions regarding investment, credit, or regulatory compliance.

External users rely on the transparency and accuracy of financial reports to guide their economic decisions, such as whether to buy or sell stock, extend credit, or enter into business transactions with the company. The structured format of financial statements, such as the income statement, balance sheet, and cash flow statement, facilitates comparison and analysis across different entities and time periods, which is critical for these external users.

While internal teams, management, and shareholders may also utilize financial reporting for various purposes such as tracking operational performance or understanding returns on investment, the primary purpose of financial reporting aligns with the needs of external stakeholders to support decision-making processes in different economic contexts.