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Hospitality Industry Managerial Accounting 8th Edition

Hospitality Industry Managerial Accounting (8th Edition)

Book Edition8th Edition
Author(s)Schmidgall
ISBN9780866124973
PublisherEduc. Inst. Of The American Hotel & Motel Assoc.
SubjectAccounting

Chapter 2, End of Chapter, Review Questions, Exercise 1

Page 69

Here is a tip:

A balance sheet is considered a financial statement that reports the company's liabilities, assets, and stakeholder's equity at a particular point in time.

Explanation

  • Creditors use the information present in the balance sheet to ascertain the creditworthiness of the company so that they can set the limit to provide credit facilities to the company.
  • Generally, the creditors are interested in short term creditworthiness rather than long term repayment capacity.
  • Investors assess the financial performance of the company to ensure the safety and profitability of their investments and analyze the risk and returns on their investments.

Verified Answer

  • Creditors use the balance sheet to analyze the creditworthiness of the company.
  • Investors assess the financial performance of the company to ensure the safety and profitability of their investments.
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