Question

A research analyst is evaluating the financial statements of Tripod Photo Company(TPC). The analyst intends to make a recommendation on the stock after careful scrutiny of TPC's financial statements. The analyst observes that TPC initiated a dividend payment exactly two years ago and believes its operating cash flows appear to be able to support an even higher dividend payment next year. The sustainability of dividends is most likely to be evaluated using the:

a. Balance Sheet
b. Income Statement
c. Statement of Cash Flow

Answer 1

c. Statement of Cash Flow

Step-by-step explanation:

The statement of income records all profits generated and expenses incurred during a given period.

The Statement of stockholder equity comprises of the common stock and the retained earnings that could be used to determine the ending balance.

The balance sheet records the company's assets and liabilities

And, the cash flow statement analyzes the comp's cash inflow and cash outflow position. It includes three activities i.e operating, investing and financing activities

Since the question is talking about the dividend payment in operating cash flows so it should be evaluated by using the cash flow statement.