Potential Stockholders and Lenders Are Interested in a Company's Financial

question 77

Essay

Potential stockholders and lenders are interested in a company's financial statements.Several financial statement items appear below.Answer the questions that follow.
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$$\begin{array} { l l l } \text { Accounts receivable } & \text { Accounts payable } & \text { Advertising expense } \\\text { Cash } & \text { Depreciation expense } & \text { Income taxes } \\\text { Common stock } & \text { Land held for future expansion } & \text { Dividends } \\\text { Retained earnings } & \text { Loss on the sale of equipment } & \text { Service revenue } \\\text { Office supplies } & \text { Patent amortization expense } & \text { Sales } \\\text { Unearned revenue } & \text { Utilities expense } &\end{array}$$ A) Which two items would stockholders be most interested in that can either be computed from the above data or are included in the items listed above? Explain why the two you selected are important to stockholders.

B) In which one item would lenders be most interested? Expl ain why this item is important.

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Definitions:

Five-Year Period

A duration or span of time that lasts for five consecutive years.

Stock Valued

The process of determining the intrinsic value of a stock based on predictions of future earnings and the company's overall financial health.

Increased

An upward adjustment in quantity, size, intensity, or the like.

Compound-Interest GIC

A Guaranteed Investment Certificate (GIC) that grows by earning interest on the principal and the accumulated interest over time.