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ACCA Applied Knowledge · Financial Accounting · The context and purpose of financial statements for external reporting

Which of the following users of financial statements is most likely to be primarily interested in the entity's ability to pay interest and repay loans when due?

A bank that has lent money to the entity is mainly concerned with whether the entity can pay interest and repay the loan when due. Customers, employees and competitors have different primary interests, such as continuity of supply, job security or market comparison.

  1. AA bank that has lent the entity moneyCorrect
  2. BA customer seeking assurance of continued supply
  3. CAn employee seeking information on pay rises only
  4. DA competitor assessing market share

Explanation

Lenders such as banks focus on the entity's ability to service debt, meaning interest payments and repayment of capital. Customers focus on continuity of supply, employees on stability and pay, and competitors are not primary users of general purpose statements.

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