Question

'Analysis of financial statements is useful and significant to different users.' Which of the following users is concerned with a firm's long-term solvency and survival?

• A. Labour unions
• B. Trade payables
• C. Finance manager
• D. Lenders

Hint:

Different users focus on different aspects:

• Short-term creditors (Trade payables) \(\Rightarrow\) Liquidity ratios
• Long-term creditors (Lenders) \(\Rightarrow\) Solvency ratios (Debt-Equity, Interest Coverage)
• Investors \(\Rightarrow\) Profitability and growth
• Management \(\Rightarrow\) All aspects for decision-making
• Labour unions \(\Rightarrow\) Profitability and wage-paying capacity

Lenders care most about long-term survival!

Answer 1

The Correct Option is D