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Terms in this set (29)

The balance sheet is used by creditors and investors to determine the financial position of a company at a particular time. This can help creditors determine whether or not to loan money to a company and it can help investors decide whether or not to invest in a company. This income statement is used by investors and creditors to monitor a company's net income because that indicates a firm's ability to sell goods and and services for more than they cost to produce or deliver. If an investor believes the future earnings will improve and lead to dividends if stock is purchase, then they will buy stock with the intention of the ability to sell it later at a higher price. Lenders depends on future earnings to provide the resources to repay loans. Creditors also closely monitor the statement of stockholders' equity because a company's policy on dividend payments to the stockholder affects its ability to repay debts. Investors examine retained earnings to determine whether the company is reinvesting a sufficient portion of earnings to support future growth. The statement of cash flows is used by bankers when they evaluate the operating activities, as they indicate the company's ability to generate cash from sales to meet its current cash needs. Left over funds can be used to pay back bank debt or expand the company. Stockholders will invest in a company if they believe it will eventually generate more cash from operation than it uses so that cash will be able to be used to pay dividend sand the company will expand.