Financial decisions often place heavier emphasis on one type of financial statement over the others. consider each of the following hypothetical situations independently.
(a) the north face, inc. is considering extending credit to a new customer. the terms of the credit would require the customer to pay within 30 days of receipt of goods.
(b) an investor is considering purchasing common stock of amazon. com. the investor plans to hold the investment for at least 5 years.
(c) chase manhattan is considering extending a loan to a small company. the companywould be required to make interest payments at the end of each year for 5 years, and to repay the loan at the end of the fifth year.
(d) the president of campbell soup is trying to determine whether the company is generating enough cash to increase the amount of dividends paid to investors in this and future years, and still have enough cash to buy equipment as it is needed.