What is(are) the difference(s) between the primary users and the other users of financial

information?

2. There are many differences that can be associated with the primary users and the other users of
financial information, however, the ultimate difference is to whom general purpose financial statements
are directed. The general purpose financial reports are primarily directed to primary users. The other
users may find the financial reports as useful but these reports are not directed to them. To state
another difference, the two users encompass different parties. Primary users consist of existing and
potential investors, lenders and other creditors and each have different interests on the financial
information. Other users, on the other hand, include employees, customers, governments and their
agencies, and the public and similar to the primary users they also have different interests in the
financial information.

3. It is important for primary users to assess the cash flow prospects of the entity for the reason that,
first, it enables the existing and potential investors to decide whether to buy, hold, or sell their
investments. Their decisions will greatly depend on the returns that they expect from their investments
and the capability of the entity to provide the returns on investment can be determined in the cash flow
prospects of the entity. Second, it also enables the existing and potential lenders and other creditors to
decide whether they should provide to or settle loans from the entity. Their decisions will greatly
depend on the ability of the entity to pay principal and interest payments or other return expected by
the existing and potential lenders and other creditors. Similarly, the capability of the entity to pay
principal and interest payments or other returns can be determined in the cash flow prospects of the
entity.

5. Financial position generally refers to information regarding the entity’s economic resources and the
claims regarding the entity. It refers to assets, liabilities, and equity of an entity at a specific period of
time. Financial position is important to primary users since it enables them to identify the strength and
weakness of the entity in terms of finance. It also provides information that will help primary users to
assess the entity’s liquidity and solvency. Since these users need information to determine whether they
should buy, hold, or sell their investments, to assess the entity’s capability to pay dividends, and to
determine whether their loans, interests, and other amounts will be paid when they fall due, they will
need to determine the capability of the entity’s to cover their maturing obligations in the future and to
determine the availability of cash to meet financial commitments over a long term. In general, the
financial position will help the primary users to estimate the value of the entity.

In addition to Ms. Nessam's answer to question 4, It is true that financial position can help primary users
to assess the entity's liquidity, solvency and need for additional financing but other than that liquidity,
solvency, and the need for additional financing will help these users to determine whether they should
continue with their investments as for the investors or to continue their credit offers as for the lenders and
other creditors. SInce investors are mainly concerned with the risk inherent to their investments, it is
imperative for them to understand and determine the entity's

Why is it important for primary users to assess the cash flow of the entity?

What is “financial position” and what is its importance to primary users?

In addition to Ms. Nessam's answer to question 4, it is true that financial position can help primary users
to assess the entity's liquidity, solvency and need for additional financing but let me further expound her
answer by tackling how liquidity and solvency will help primary users. Liquidity and solvency will help
these users to determine whether they should continue with their investments (as for the investors) or to
continue their credit offers (as for the lenders and other creditors). The liquidity of an entity will help the
existing and potential investors to determine how well an entity handles its cash flow which is important in
determining the ability of an entity to pay dividends or return on investments. Solvency, on the other hand,
will help existing and potential lenders and creditors in assessing whether an entity is able to meet its debt
obligations. Solvency will indicate whether an entity is able to generate enough cash flows to meet its
obligations. So this is how liquidity and solvency helps primary users in making decisions.