You Evaluate Loan Requests as Part of Your Job at Eastwood

question 175

Essay

You evaluate loan requests as part of your job at Eastwood National Bank. One loan request you received is from Surfer Dude Supplies, a small proprietorship. Richard Tracy, the owner, is requesting $105,000 and brings you a trial balance
(or statement of accounts) for his first year of operations ended December 31.​RequiredWhile you are willing to work with Richard, how would you explain to him that a complete set of financial statements from his accountant would be more useful for evaluating the loan request?

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Definitions:

Comparative Advantage

The ability of a party to produce a particular good or service at a lower marginal and opportunity cost over another.

Specialize

The process of focusing effort and resources on a particular area of expertise or production to increase efficiency and output.

Production Possibility Frontiers

A curve depicting all maximum output possibilities for two goods, given a set of inputs and technology, illustrating the trade-offs and opportunity costs.

Opportunity Cost

Abandoning potential gains available from alternative choices when one is picked.