You are reviewing the financial statements of a company as part of your credit and investment analysis. The company has provided you with both historical (past three years) and projected (next two years) financial statements (income statements and cashflow statements, but not balance sheets).

1 Which statements do you review to determine if the company will be able to pay back a loan in 6 months? Income Statements ___ Cashflow Statements ___

2 You notice that there is much more year-to-year variation in cashflow than income. Does this cause you significant concern? Yes ___ No ___

3 Which statements will give you a better sense of the companys ability to pay back a loan five years from now? Income Statements ___ Cashflow Statements ___