It is important to remember when assessing the financial soundness of a company that:
A)if profits are adequate,there will be sufficient funds to pay salaries and fund cash flow.
B)cash flow is the key financial element in determining financial soundness.
C)revenues need to equal to twice the debt load in order for the company to be viable.
D)the buyer is buying the past revenues and profits of the company.

Question

Quizplus · Accepted Answer

While profits are important, cash flow is the key indicator of a company's financial health as it indicates the ability to meet financial obligations in a timely manner. Revenues do not necessarily need to be double the debt load for a company to be viable, as this would vary depending on the industry and company. When buying a company, the buyer is not just buying past revenues and profits but also the potential future growth and performance.

It Is Important to Remember When Assessing the Financial Soundness