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?
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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?
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$
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105,300
97,200
Accounts receivable
121,200
91,500
Inventory
163,700
190,700
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27,300
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43,660
Inventory
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