The Information Needs of a Specific User of Financial Accounting

question 17

Essay

The information needs of a specific user of financial accounting information depends upon the kinds of decisions that user makes. Identify the major users of accounting information and discuss what questions financial accounting information answers for each group of users.

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Definitions:

Parent Company

A parent company is a corporation that owns enough voting stock in another firm to control management and operations by influencing or electing its board of directors.

Subsidiary Company

A subsidiary company is one that is controlled by another company, typically referred to as the parent company, through ownership of more than half of the subsidiary’s voting stock.

Equity Method

This accounting technique is used for consolidating the financial statements of a company in which the investing company holds significant influence, but not full control or majority ownership.

Dividends Received

Income received by shareholders when a company distributes a portion of its profits to its stockholders.