(a) Brenda Starr believes that the analysis of financial statements is directed at two characteristics of a company: liquidity and profitability. Is Brenda correct? Explain.

(b) Are short-term creditors, long-term creditors, and stockholders primarily interested in the same characteristics of a company? Explain. Name ratios useful in assessing

(a) liquidity,

(b) solvency, and

(c) profitability. Dave Rose, the founder of Water- boots Inc., needs to raise $500,000 to expand his com pany's operations. He has been told that raising the money through debt will increase the riskiness of his company much more than issuing stock. He doesn't understand why this is true. Explain it to him.

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