The creditors of a firm analyze financial statements so that they can better understand:
A) the firm's amount of debt.
B) the firm's ability to generate sufficient cash flows to meet its legal obligations first and still have sufficient cash flows to meet debt repayment and interest payments.
C) the firm's ability to meet its short-term obligations.
D) All of the above.

Question

Quizplus · Accepted Answer

Creditors analyze financial statements to determine the firm's amount of debt (A), its ability to generate sufficient cash flows to meet both its legal obligations and debt repayments (B), and its ability to meet short-term obligations (C). Therefore, all of the above options are correct.

The Creditors of a Firm Analyze Financial Statements So That