How Does a Financial Statement Audit Affect a Bank Manager's

question 54

Multiple Choice

How does a financial statement audit affect a bank manager's decisions in providing loans to a corporate client?

• A) Information risk could be reduced, so the bank manager may lower the interest rate charged.
• B) The bank manager will lower the risk-free interest rate that applies to the corporation.
• C) The business risk for the client will be reduced, so the borrowing costs will decline.
• D) The business risk for the client will be increased, so the borrowing costs will be lowered.

---

Definitions:

Total Assets

The sum of all financial and physical resources owned by a business.

Vertical Analysis

A financial statement analysis method where each line item is listed as a percentage of a base figure within the statement, facilitating comparisons.

Current Liabilities

Current liabilities are financial obligations a company owes and is expected to pay within a year.

Working Capital

The excess of the current assets of a business over its current liabilities.