The Creditors of a Company Analyse Financial Statements So That

question 59

Multiple Choice

The creditors of a company analyse financial statements so that they can focus on

• A) the company's amount of debt.
• B) the company's ability to generate sufficient cash flows to meet all legal obligations first and still have sufficient cash flows to meet debt repayment and interest payments.
• C) the company's ability to meet its short-term obligations.
• D) All of the above.

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Definitions:

Supplies

Items that are used in the day-to-day operation of a business but do not directly become part of the finished product.

Fees Earned

Income received by a company or professional for services rendered.

Credit

A bookkeeping entry that increases liabilities or equity on the balance sheet or decreases an asset or expense account on the income statement.

Understated

Describes a situation where the amount, value, or importance of something is reported lower than it actually is, potentially affecting financial statements and analysis.