When reviewing a balance sheet of a corporation, what are things or items that indicate a company is in good financial health? What items indicate poor financial health? How can these concepts be applied to a personal financial statement? If your a banker reviewing a loan application, what types of items you might see on a personal financial statement sheet that would make an applicant look like a good or bad prospect for a loan?
Solution
Answer:
Items in Balance sheet that indicate a company is in good financial health:
1. Current Assets are more than Current LIabilties
2. Long term debts are less as compared to short term.
3. Company has sufficient resrves and surplus.
4. Interneally generated funds are more than external funds.
5. Compnay has sufficient liquid assets to pay current liabilities.
Items in Balance sheet that indicate a company is in poor financial health:
1. Current Assets are Less than Current LIabilties
2. Long term debts are more as compared to short term.
3. Company has insufficient resrves and surplus.
3. Interneally generated funds are less than external funds.
4. Compnay does not have sufficient liquid assets to pay current liabilities.
Above cocepts/ criterias can also be applied to evalulate the personal financial statement.
Being a banker we would like to evalualte the credit worthiness of the loan applicant. Personal financial statement can show the liquiduty position of the person and fixed assets heelpd by him which shall give security to the bank.
More long term liabilties means lesser capacity ot pay the debt. hence the bank looks for the current assets ratio and liquidy ratio of the person / firm. it shows the debt repayment capacity of the person.
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Unit-IV; Professional Sales Representative (PSR).pptx
When reviewing a balance sheet of a corporation- what are things or it.docx
1. When reviewing a balance sheet of a corporation, what are things or items that indicate a
company is in good financial health? What items indicate poor financial health? How can these
concepts be applied to a personal financial statement? If your a banker reviewing a loan
application, what types of items you might see on a personal financial statement sheet that would
make an applicant look like a good or bad prospect for a loan?
Solution
Answer:
Items in Balance sheet that indicate a company is in good financial health:
1. Current Assets are more than Current LIabilties
2. Long term debts are less as compared to short term.
3. Company has sufficient resrves and surplus.
4. Interneally generated funds are more than external funds.
5. Compnay has sufficient liquid assets to pay current liabilities.
Items in Balance sheet that indicate a company is in poor financial health:
1. Current Assets are Less than Current LIabilties
2. Long term debts are more as compared to short term.
3. Company has insufficient resrves and surplus.
3. Interneally generated funds are less than external funds.
4. Compnay does not have sufficient liquid assets to pay current liabilities.
Above cocepts/ criterias can also be applied to evalulate the personal financial statement.
Being a banker we would like to evalualte the credit worthiness of the loan applicant. Personal
financial statement can show the liquiduty position of the person and fixed assets heelpd by him
which shall give security to the bank.
More long term liabilties means lesser capacity ot pay the debt. hence the bank looks for the
current assets ratio and liquidy ratio of the person / firm. it shows the debt repayment capacity of
the person.
