The creditors of a firm analyze financial statements so that they can focus on:
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 assess the firm's overall financial health and ability to meet its obligations, which includes evaluating the amount of debt, the ability to generate sufficient cash flows for legal and debt payments, as well as the ability to meet short-term obligations. Therefore, all of the choices (A, B, and C) are relevant and important for creditors to focus on.

The Creditors of a Firm Analyze Financial Statements So That