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JAMB Principles of Accounts 1994 Question 4

Question 4

Introduction to Accounting

Accounting information is used by investors and creditors of a company to predict

  1. A.future cash flows of the company
  2. B.future tax payments of the company
  3. C.potential merger candidates for the company
  4. D.appropriate remunerations for the company's staff.
Show the answer and explanation

Answer: A (future cash flows of the company)

Explanation

Investors and lenders want to know whether the company will generate enough cash to pay dividends, interest and loans, so they use accounts to predict future cash flows.