Final answer:
Internal and external users have different information demands, with firms traditionally focusing on external users, but technology has improved internal data access. Financial transactions affect a firm's financial position, while nonfinancial transactions are operationally important but do not directly affect finances. Examples include purchasing machinery (financial) and employee performance reviews (nonfinancial).
Step-by-step explanation:
Internal and external users represent two key groups that demand information from an information system. Internal users are typically parties within the organization, such as management and employees, who require information to make decisions related to company operations. External users, such as investors, creditors, and regulatory agencies, rely on information to make decisions about their relationship with the firm. Internal users often need more detailed and frequent information, whereas external users need summarized and periodically published data, largely for making investment and credit decisions.
Historically, firms have catered more to external users by focusing on financial statements and compliance reports. Nevertheless, in the contemporary business environment, the advancement of technology has increased the capacity to serve internal users with real-time data and analytics tools, helping them to make evidence-based decisions.
Distinguishing between financial and nonfinancial transactions is crucial for users of information. Financial transactions involve exchanges that affect the financial position of the firm, such as purchasing machinery (financial transaction), paying for services (financial transaction), and receiving a cash payment from a customer (financial transaction). Nonfinancial transactions, on the other hand, are not directly related to the financial position but are still important for operational purposes, such as collecting customer feedback (nonfinancial transaction), conducting employee performance reviews (nonfinancial transaction), and monitoring production quality (nonfinancial transaction).