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.

Question

Quizplus · Accepted Answer

Creditors have multiple concerns while analyzing a company's financial statements. Firstly, they need to assess the amount of debt a company has taken and its creditworthiness. Secondly, they evaluate the company's ability to generate sufficient cash flows to meet its legal obligations and debt repayment, and interest payments. Thirdly, they analyze the company's liquidity position to ensure the availability of adequate cash and other liquid assets to meet its short-term obligations. Therefore, all the options, i.e., A, B, and C, are correct, and the best answer would be D, i.e., all of the above.

The Creditors of a Company Analyse Financial Statements So That