A banker contemplating a loan to a company should focus on which section(s)of the Statement of Cash Flows in order to determine the company's ability to repay the loan?
A)Operating activities
B)Operating and financing activities
C)Investing activities
D)Operating and investing activities

Question

Quizplus · Accepted Answer

The operating activities section of the Statement of Cash Flows shows the cash generated from the company's primary business operations. This section highlights the company's ability to generate sufficient cash flows to cover its operational expenses and debt obligations. Therefore, it is the most relevant section for a banker to focus on when determining the company's ability to repay a loan. The financing and investing activities sections mostly capture cash inflows and outflows related to debt and equity transactions, which may not be as relevant to the company's ability to repay a loan.

A Banker Contemplating a Loan to a Company Should Focus