If you wanted to make sure a company has enough money available to pay its bills, the financial statement that would be most helpful is the D. Cash flow statement.
Here's why:
1. The Cash Flow Statement provides information about the inflow and outflow of cash and cash equivalents from operating, investing, and financing activities.
2. By analyzing the cash flow statement, you can see how much cash is coming into the company from its operations, how much is being spent on investments, and how much is being used for financing activities.
3. It helps you understand if the company is generating enough cash to cover its day-to-day expenses and obligations.
4. Monitoring the cash flow statement is crucial for assessing the liquidity and financial health of a company, as it focuses on actual cash movements rather than just profits or losses.
5. In comparison, the Balance Sheet provides a snapshot of a company's financial position at a specific point in time, showing assets, liabilities, and equity. The Income Statement shows revenues and expenses over a period, indicating profitability. The Statement of Owners' Equity outlines changes in equity over time. While these statements are important for different purposes, when it comes to ensuring there is enough cash to pay bills, the Cash Flow Statement is the most relevant choice.
