Lenders form opinions about a company's credit risk by comparing current and future debt-service requirements to estimates of the company's current and expected future cash flows.

Question

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Lenders use cash flow analysis to evaluate a company's ability to repay its debts. They compare the cash inflows and outflows based on the company's historical performance and estimated future performance to determine if the company will have enough cash to repay its debts.

Lenders Form Opinions About a Company's Credit Risk by Comparing