Question

Creditors analyze the statement of cash flows to​ determine:
a. whether or not the company can pay principal and interest on its debt.
b. total interest earned during the period.
c. the quality of the​ company's earnings.
d. if management was overpaid.

Answer 1

Answer:

a. whether or not the company can pay principal and interest on its debt.

Explanation:

Creditors are banks or corporations from which a company can borrow funds(capital). Before a company is approved for borrowing, the creditors would look into their financial statements like the balance sheet, income statement and statement of cashflows. However, in the statement of cashflows, the creditors would be interested in how effective a company is in paying the principal and interests on the loans they currently have.