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I agree while creating a New user we get the option Generate New Password, while a user forgets the password we help them by resetting them. Even then we have the option to edit the user and check the Generate New password.

Why is there two options to set a New Password, Salesforce could have given only one option instead them both.

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"Generate new password and notify user immediately" can also be used to force a new email address on the existing user profile without sending the User a confirmation email to their existing email on file to confirm the change. "Reset password" only sends an email to their existing email address with the password reset link.

Per Salesforce Help:

"Selecting "Generate new password and notify user immediately" checkbox will update the email address therefore skipping the email change verification part and at the same time will also send a password reset email to the new email address."

Source: https://help.salesforce.com/articleView?id=000340139&language=en_US&type=1&mode=1

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