Creditors analyze the statement of cash flows to determine:
A)total interest earned during the period.
B)the quality of the company's earnings.
C)whether or not the company can pay principal and interest on its debt.
D)if management was overpaid.

Question

Quizplus · Accepted Answer

Creditors are interested in knowing whether a company can generate enough cash flow to make payments on its debt obligations. They analyze the statement of cash flows to determine the company's ability to pay principals and interests on its debt. Therefore, the correct option is C. Options A, B, and D are not directly related to the analysis of the statement of cash flows by creditors.

Creditors Analyze the Statement of Cash Flows to Determine