Accounting: Tools for Business Decision Making, 5th Edition

Published by Wiley
ISBN 10: 1118128168
ISBN 13: 978-1-11812-816-9

Chapter 1 - Introduction to Financial Statements - Problems - Set A - Page 35: P1-2A

Answer

(a) Balance Sheet (b) Income Statement (c) Balance Sheet (d) Statement of Cash Flows

Work Step by Step

(a) Statement of Financial Position shows the account receivable position and the liquidity position of the company. Short term liabilities of the clients are relevant to this decision, which can be seen in the balance sheet. (b) Investors will be interested in the future performance of Amazon which can be predicted by the statement of profit and loss. (c) Statement of Financial Position informs about the existing debts as well as the assets of the company. If a company's assets are greater than debts, then lending is a good decision as the company would be able to pay off debts by liquidating assets. (d) Statement of Cash Flow shows the increase or decrease in cash generated by the company during the year. If the company has generated more cash than it currently needs for its operations, then it can afford to increase the amount of dividends.
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