Question

Which of the following is not one of the benefits investors and creditors can

expect as a result of the presentation of the statement of cash flows?
A. Assess the enterprise's ability to meet its obligations, its ability to pay dividends, and its need for external financing.
B. Assess the effects on an enterprise's financial position of both its cash and noncash investing and financing transactions during a period.
C. Assess the enterprise's ability to expand its operating facilities through the issuance of long-term debt.
D. Assess the reasons for differences between net income and associated cash receipts and payments.

Answer 1

The statement of cash flows provides information about cash inflows and outflows and allows investors and creditors to assess the enterprise's ability to meet obligations and pay dividends. Option C is not one of the benefits provided by the statement of cash flows.

Step-by-step explanation:

The correct answer is C. Assess the enterprise's ability to expand its operating facilities through the issuance of long-term debt.

The statement of cash flows provides information about the cash inflows and outflows from operating, investing, and financing activities of an enterprise. It helps investors and creditors assess the company's ability to meet its obligations, pay dividends, and determine its need for external financing. It also enables them to identify and understand the reasons for differences between net income and cash receipts and payments.

However, assessing the enterprise's ability to expand its operating facilities through the issuance of long-term debt is not a direct benefit of the presentation of the statement of cash flows. This information is usually found in the notes to the financial statements.