Question
In: Accounting
Why is the liabilities section of the statement of financial position of primary significance to bankers?
Why is the liabilities section of the statement of financial position of primary significance to bankers?
Solutions
Expert Solution
Bankers primary focussed is on lending of loans and advances to the business enterprise. So their primary focussed is on the liabilities side of financial position of business enterprise. Reason being if a banker had to propose any loans and advances to business enterprise, he need to know how much already the business enterprise had taken loans from other banks. If the business enterprise had already taken other huge loans, then the chances of loans account getting non performing assets also increases. This will add bank stress increasing and banker into problem. Other Liabilities in the financial position if hypothecated with the fixed assets of the business and the business is in also stress, then the banker would avoid lending. Also from the liability section, the banker would get an idea of equity versus debt obligation of the business enterprise. If the debt obligation is excessive higher than equity, than it showed that business had invested its own low capital and taken excessive loans. This could be highly risky to the banker lending new loans. This all can be understood from the liability section of the statement financial position.
ekkarill92 answered 2 years agoRelated Solutions
Why is the liabilities section of the balance sheet of primary significance to bankers?
Why is the liabilities section of the balance sheet of primary
significance to bankers?
Financial Statement reflects the position of assets and liabilities of the organization. Thus, the financial statement...
Financial Statement reflects the position of assets and
liabilities of the organization. Thus, the financial statement
should reflect a true and fair view of the state of affairs of the
Company. On submitting the XBRL document to SEC, we are
communicating the state of assets , liabilities of the organization
to SEC i.e. we are submitting the financial results and financial
position of the company to SEC, thus the same should be correct in
all aspects. However, on review of...
Provisions are recognised as a liability in the statement of financial position whereas contingent liabilities are...
Provisions are recognised as a liability in the statement of
financial position whereas contingent liabilities are not
recognised in the financial statements but disclosed in the notes
to financial statements. In essence all provisions are contingent
because they are uncertain in timing or amount however there are
number of reasons why provisions are recognised in the financial
statements but contingent liabilities are not.
Required
Outline the reasons why provisions are recognised in financial
statements and the reasons why contingent liabilities...
The current assets and current liabilities sections of the statement of financial position of Monty Corp....
The current assets and current liabilities sections of the
statement of financial position of Monty Corp. are as
follows:
MONTY CORP.
Statement of Financial Position (partial)
December 31, 2020
Cash
$43,000
Accounts payable
$62,000
Accounts receivable
$95,000
Notes payable
68,000
Allowance for doubtful accounts
7,800
87,200
Inventory
186,600
Prepaid expenses
9,500
$326,300
$130,000
The following errors have been discovered in the corporation’s
accounting:
1.
January 2021 cash disbursements that were entered as at
December 2020 included payments of accounts payable...
Present current and long term assets and liabilities on a balance sheet (statement of financial position)...
Present current and long term assets and liabilities on a
balance sheet (statement of financial position) including require
disclosures. Please explain.
Question 5 (Q 6) The shareholders' equity section of the statement of financial position of Dolce...
Question 5 (Q 6)
The shareholders'
equity section of the statement of financial position of Dolce
Corporation as at December 31, 2020, is given below:
Shareholders' equity:
Preferred shares, $9
non-cumulative, unlimited authorized, 200,000 shares issued and
outstanding
$ 5,000,000
Common shares,
unlimited authorized, par value $30, 250,000 shares issued and
outstanding
7,500,000
Retained earnings
4,500,000
Total shareholders' equity
$17,000,000
The board of
directors for Dolce Corporation feels it is important that its
shares trade at or below $50 per...
The current section of Yawn Ltd's statement of financial position at 30 June 2016 is presented...
The current section of Yawn Ltd's statement of financial
position at 30 June 2016 is presented below.
2016 2015
$ $
Current assets
Cash 105,300 97,200
Accounts receivable 121,200 91,500
Inventory 163,700 190,700
Prepaid expenses 27,300 22,400
Total current assets 417,500 401,800
Current liabilities
Accounts payable 83,100 89,900
Accrued expenses payable 14,600 4,900
Total current liabilities 97,700 94,800
Other information 1. Profit for the year ended...
The current section of Yawn Ltd's statement of financial position at 30 June 2016 is presented...
The current section of Yawn Ltd's statement of
financial position at 30 June 2016 is presented below.
2016
2015
$
$
Current assets
Cash
105,300
97,200
Accounts receivable
121,200
91,500
Inventory
163,700
190,700
Prepaid expenses
27,300
22,400
Total current assets
417,500
401,800
Current liabilities
Accounts payable
83,100
89,900
Accrued expenses payable
14,600
4,900
Total current liabilities
97,700
94,800
Other information
1.
Profit for the year ended 30 June 2016 was
$148,600.
2.
Depreciation expense was $19,100.
Required
Prepare the net...
The following section is taken from Privy Ltd’s statement of financial position at 31 December 2018....
The following section is taken from Privy Ltd’s statement of
financial position at 31 December 2018.
Interest is payable half-yearly on 1 January and 1 July. Assume
no interest is accrued on 30 June.
Current liabilities
Interest payable on unsecured notes (for 6 months from 1 July to
31 December)
$360,000
Non-current liabilities
Unsecured notes payable, 10% due 1 January 2022
$6,000,000
Required: Prepare journal entries to record
interest payments, and redemption of unsecured notes.
a. Journalise the payment of interest...
A comparative statement of financial position for Ayayai Corporation follows: AYAYAI CORPORATION Statement of Financial Position...
A comparative statement of financial position for Ayayai
Corporation follows:
AYAYAI CORPORATION
Statement of Financial Position
December 31
Assets
2020
2019
Cash
$48,100
$21,460
Accounts receivable
64,380
43,660
Inventory
98,420
59,940
FV-OCI investments in shares
46,620
62,160
Land
48,100
76,220
Equipment
288,600
318,200
Accumulated depreciation—equipment
(86,580
)
(63,640
)
Goodwill
91,760
128,020
Total
$599,400
$646,020
Liabilities and Shareholders’ Equity
Accounts payable
$8,880
$37,740
Dividends payable
11,100
23,680
Notes payable
162,800
247,900
Common shares
196,100
92,500
Retained earnings
213,120
210,160
Accumulated...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- In 1941, President Roosevelt spoke about the “four freedoms.” For many in the country, however, these...
- Your friend is looking for investors in a risky business venture. To convince you to participate,...
- Suppose you observe the following situation: State of Economy Probability of State Return if State Occurs...
- Merger Analysis TransWorld Communications Inc., a large telecommunications company, is evaluating the possible acquisition of Georgia...
- Journal Entries and Trial Balance Elite Realty acts as an agent in buying, selling, renting, and...
- In racket Assume that the elements of a list are indexed starting with 1. Write a...
- Describe System Development Life Cycle (SDLC) and how it is used.
ADVERTISEMENT