Question

The cash flow identity states that cash flow from assets equals cash flows to ______.

a. creditors and bondholders
b. creditors and stockholders
c. equity investors and the government
d. equity investors and stockholders

Answer 1

The cash flow identity affirms that cash flow from a company's assets is directed to both creditors and stockholders.

Step-by-step explanation:

The cash flow identity states that cash flow from assets equals cash flow to creditors and stockholders. This financial principle illustrates that the resources generated by a company's assets are ultimately directed to its creditors and shareholders.

Creditors refer to entities such as banks or bondholders from which a company borrows funds, while stockholders or shareholders are investors who own the company's equity.