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financial statement users think that cash flows are a critical part of a business’ ability to...

financial statement users think that cash flows are a critical part of a business’ ability to remain:

a. profitable.

b. liquid.

c. solvent.

d. none of the above.

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Answer #1

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Correct ans is (c)solvent

financial statement users think that cash flows are a critical part of a business’ ability to remain solvent.

For a business to be successful, it must have sufficient cash at all times. It needs cash to pay its expenses, to pay bank loans, to pay taxes and to purchase new assets. A cash flow report determines whether a business has enough cash to do exactly this.

Having cash is a key requirement for a business to stay solvent.

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