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<p><em><strong>XYZ ordinary shares that would give ABC significant influence over XYZ. Which financial statement should ABC primarily use to assess the amounts, timing, and certainty of future cash flows of XYZ Company? </strong></em></p> <p><em><strong>A. Income statement. </strong></em></p> <p><em><strong>B. Statement of changes in equity. </strong></em></p> <p><em><strong>C. Statement of cash flows.</strong></em></p> <p><em><strong>D. Statement of financial position.</strong></em></p>
We would be requiring more information. Projected accounts are much more relevant here.
However, Current Ratio, Quick Ratio are appropriate. Future cash flows must be analyzed using Cash Flow Statement it involves everything, CFO (Cash Flow from Operations), CFI (Cash Flow from Investing), CFF (Cash Flow from Financing).
Answer C is correct in this case . Statement of cash flows
B. Statement of changes in equity.
The statement of financial position; however the income statement would be used to calculate sustainable earnings, so the non cash items are added back, eg. depreciation, related party interest; the extraordinary activities will be added back, and all the IFRS adjustments added back.
statement of financial position
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