An investor who wished to answer the question, "Can the company pay its current liabilities?" should investigate:
A)the financing activities section of the cash flow statement.
B)the current assets and current liabilities on the balance sheet.
C)the sales revenue trend.
D)none of the above.

Question

Quizplus · Accepted Answer

The best way to determine if a company can pay its current liabilities is to compare the current assets (such as cash, accounts receivable, and inventory) with current liabilities (such as accounts payable, short-term debt, and other obligations due within the next year) on the balance sheet. A company with a healthy level of current assets compared to its current liabilities is more likely to be able to pay off its obligations as they come due. The financing activities section of the cash flow statement and sales revenue trend may provide additional insights into the company's financial health, but they may not directly answer the question of whether the company can pay its current liabilities.

An Investor Who Wished to Answer the Question, "Can the Company