If an investor is interested in the solvency of a company, he/she should analyze the
A)balance sheet and income statement.
B)income statement, balance sheet, and statement of cash flows.
C)balance sheet and statement of cash flows.
D)statement of cash flows only.

Question

Quizplus · Accepted Answer

Solvency refers to a company's ability to meet its long-term financial obligations. The balance sheet provides a snapshot of the company's financial position at a specific point in time, including its assets, liabilities, and equity, which are crucial for assessing solvency. The statement of cash flows shows how changes in the balance sheet and income affect cash and cash equivalents, highlighting the company's ability to generate cash to meet its obligations. Together, these statements give a comprehensive view of a company's solvency.

If an Investor Is Interested in the Solvency of a Company