CFA Practice Question

There are 534 practice questions for this study session.

CFA Practice Question

What is the primary reason why lenders are interested in operating cash flows as well as earnings?

A. They want to know if the company can meet or exceed its past quarterly dividend payments.
B. They want to assess a company's future equity value and underwrite an issuance of securities for a company that has high expected operating cash flows.
C. They want to assess whether or not a company is a good credit risk.
Correct Answer: C

Lenders want to maximize the likelihood that they will be repaid in full. Payments are made with available cash flow.

User Contributed Comments 3

User Comment
danlan Lenders are not interested in dividend payments(A) or equity value(B), they are for shareholders.
ColonelCFA touche
johntan1979 Interest coverage
You need to log in first to add your comment.