Banks Are Likely to Request a Firm's Balance Sheet When

question 200

True/False

Banks are likely to request a firm's balance sheet when determining whether or not to loan money to the firm. However, banks would have little interest in the firm's income statement since it covers a short period of time.

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Definitions:

Sale-leaseback Transaction

A financial transaction where one party sells an asset and then leases it back from the buyer, generally to free up capital while retaining the use of the asset.

Capital Lease

A leasing arrangement considered to have the economic characteristics of asset ownership for accounting purposes.

Retained Earnings

The portion of a company's profits that is kept or retained rather than distributed to shareholders or used to pay dividends, often reinvested into the business.