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    Question

    A creditor primarily examines financial statements to

    assess the entity’s _________
    A Profitability Correct Answer Incorrect Answer
    B Solvency Correct Answer Incorrect Answer
    C Liquidity Correct Answer Incorrect Answer
    D Market value Correct Answer Incorrect Answer
    E Shareholder value Correct Answer Incorrect Answer

    Solution

    Creditors are concerned with the ability of an entity to meet its short-term obligations as and when they fall due. Therefore, they mainly focus on liquidity indicators such as current ratio, quick ratio, and working capital, rather than profitability or growth.

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