Financial Statements

Consider each decision below independently and determine which of the financial statements contains the most useful information to help in your decision.

a$.$ You are trying to determine whether a particular firm is a good investment. You understand

Section of Annual Report that share price increases are impacted heavily by a company's earnings potential.

b$.$ You are employed in the lending department of a large bank. You are trying to determine if you should lend to a potential customer. If you do make the loan you are especially concerned that the company will have sufficient collateral in the event that it is unable to repay the loan.

c$.$ You wish to invest in a firm that provides you with a steady source of income. You especially want a firm that pays out a large part of its net income as dividends.

d$.$ You are trying to determine if a particular firm will have sufficient cash flow in order to keep expanding without relying too heavily on external sources of financing.