In this activity, we link personal and corporate finance to understand why people sometimes behave like corporations, and vice versa. We begin by asking why firms issue financial statements. Firms that sell ownership shares to the public are required by law to issue financial statements (see SEC, The Laws That Govern the Securities Industry), but many other firms also publish similar financial information describing income, assets, and liabilities. Individuals are asked to produce some of the same information as they apply for loans and credit. In this Discussion, we think about the mortgage loan application process to better illuminate information gleaned from a firms four key financial statements. Similarities exist between documentation requested of an individual applying for a loan and a firm accepting funds from investors. We explore why this may be true to understand the key financial statements.
Case Study:
Juchengs Loan Application
You are a loan offer at a community bank. You are working with a client Jucheng, who is referred by Dave. Dave is a friend of Jucheng, and Jucheng is now working with you to secure his first home loan. With acceptance of Juchengs offer on a home, he must secure financing.
Jucheng is currently applying for a home loan while Dave applied recently. Differences in Dave and Juchengs financial situations distinguish them as loan applicants. Both loan applicants are buying homes of similar value and their income is similar.
Jucheng only recently accepted employment offering stable income, something he has not had in the past. Jucheng finds it harder to show a record of stable income and employment to meet income documentation requirements. Juchengs income has historically been irregular. He supplemented his earnings with the sale of imported Asian Medicinal products but revenues from Juchengs supplemental income have also been historically irregular. Jucheng manages each of his business enterprises as Sole Proprietorships. Family contributed funding. He also has personal responsibility for business debts, including a business line of credit with balances and payments that are high in relation to his business income. Juchengs amount of savings is low.
Dave has had a stable source of income and has not moved between firms for many years. He has low debt in relation to his assets. Investments listed on Daves mortgage loan application counterbalanced the liability of the mortgage loan. The origin or his down payment is savings from past earnings, so his financial claim to these funds is clear. He had made no major purchases in recent years and had no major changes in his financial situation. Always having stable income, Dave pays his debts on time. His debt to income ratio is low.
From the perspective of the lender, Juchengs request for a loan is more problematic than Daves because Jucheng is less able to document his income, assets, and liabilities. The bank needs information to prove that a borrower is likely to repay a loan. Investors considering investing in a firm are interested in similar issues.
You are in a trusted position, aiding community members seeking mortgages, but also assuring that interests of savers of this small bank are safeguarded by your due diligence. You work closely with to ensure documentation of consumer credit applications is in place at . You notice Jucheng is new to the process guaranteeing a borrowers ability for repayment and general financial stability. You are torn between empathy for Jucheng and an ethical regard for your fiduciary duty as an agent for this small bank. As a loan officer you recognize that Jucheng has difficulty documenting claims to his assets, including the origin of his down payment and his income. You wonder how you will explain the disappointing news that Jucheng may not qualify for a mortgage, even though he has enough income to cover payments currently.
Luckily, you are involved in a Financial Management course offering insight into the four key financial statements and measures derived from them used by firms to justify access to obtain capital markets. Using financial ratios derived from these statements as illustrations, you thus explain to Jucheng the reasoning behind documentation of income and earning ability, solvency, assets and debt, savings, and origins of assets that financial statements offer investors.
Speaking as a loan officer, you may use the case of these two borrowers to illustrate the points you make in this discussion.
IMPORTANT NOTES THAT WILL GUIDE YOU WHEN WRITING THIS ASSIGNMENT
Financial statements are an important tool used by taxpayers to make informed decisions. They provide information about a company’s financial performance, financial position, and liquidity. It is important for taxpayers to understand what these statements mean and why they are important.
Financial statements are used by investors, creditors and other stakeholders to make informed decisions. They also help firms make business decisions regarding their finances.
Financial statements serve as a guide for managing the company’s financial affairs by providing information about its operations, policies and problems that affect its performance over time. In addition to giving readers an understanding of how well a firm is performing financially (or not), financial statements can be used as a tool for making investment decisions—such as whether it makes sense for an investor or lender to invest in your company’s stock at this point in time
Financial statements are used to show the financial position of a company and its performance. They can be used to make informed decisions, such as whether or not you should invest in it, or compare companies against one another.
Financial statements also serve as an important tool for monitoring trends in a business’s finances over time. For example, if there has been an increase in profits over time (or if costs have decreased), this could indicate that the firm is doing well and deserves your investment dollars; conversely, if profits decrease significantly year after year—or if costs continue growing at a faster rate than revenues—it may mean that something is out of whack within the organization and needs immediate attention from management.*
Financial statements are an important tool taxpayers use in order to make informed decisions. They are also a vital part of your company’s financial health and stability, so they should be taken seriously by all stakeholders. In short, financial statements help you answer two questions: What happened? And how will we respond?
WOULD YOU LIKE A CUSTOM ESSAY JUST FOR YOU? CLICK “Continue to Order” or “Get a Quote” below to continue.
Get Assignment Help- Confidentially!
***Absolutely NO Plagiarism
***All writing is original.
Try it now!
How it works?
Follow these simple steps to get your paper done
Place your order
Fill in the order form and provide all details of your assignment.
Proceed with the payment
Choose the payment system that suits you most.
Receive the final file
Once your paper is ready, we will email it to you.
Our Services
Ace Writing Center has stood as the world’s leading custom essay writing services providers. Once you enter all the details in the order form under the place order button, the rest is up to us.
Essays
At Ace Writing Center, Nowadays, students normally have extremely busy schedules. You will note that some of them have to take on some evening or weekend jobs in order to get some income that can help them to sustain in college or in the university. This can deny them a chance to write all the essays given. Others usually get bombarded with a lot of work by their lecturers. This can still delay such students from working on all their essays. However, some of them usually try to work on all these essays but end up delivering their work late. This can prevent them from graduating since most lecturers are strict on deadlines. If you want to write a business essay, the wise way is to hire an outstanding essay writing service like us, so that you can get the best results. If you are keen, you will note that many companies usually overcharge their customers. Some of them are there only to make money. And in reality, they really don’t care to build a long term commitment with students. You should not choose such companies. You should take your time and choose a reliable company to work with. Ace Writing Center is the ultimate solution for you. We have been offering our writing service for more than 7 years. This is a clear indication that you will get quality essay writing service. We have a wide range of writers who can work on any business essay that you might have. We believe in doing extensive research so that we can provide quality work to all our clients. .
Admissions
Admission and Business Papers
Have you ever had to write an admission essay for college? The majority of students face the same issues when applying to a university or college and many in such situations decide they need professional help to cope with this matter. They get in a situation when the deadline keeps coming closer but lack motivation to start because they are just not sure if their writing skills are strong enough. We have a solution for you! Ace Writing Center is the best admission essay writing service with a large professional team and years of experience in providing high-quality papers to students of all levels and faculties. The mission of our team is to help students make their dreams of entering a good college come true and that’s what we offer!.
Editing
Editing and Proofreading
Sometimes all the words for your paper just flow out of your mind and into your fingers. You type quickly at your keyboard and there they are, your beautiful words right there on the screen. But you have no idea how to polish it up. You may be wishing there was a paper writing service that offered this type of writing service. Look no more! Here at Ace Writing Center, we offer you an editing and proofreading option that you can't find anywhere else..
Coursework
College Essay Writing
In case you are familiar Ace Writing Center, you know the way to distinguish a better company from a cheap one exactly. First of all, poor service website does not have a sufficient support. We think support team is an essential part of success; it has to answer all clients’ questions and be a connecting link between clients and their writers. On our web-service you will get answers about anything you need and your writer will receive all your instructions, assignments and requirements exactly and swiftly. A writing service that we run has got a flexible pricing system that will save you from senseless wastes and many bonus systems that let you sparing money for something important for you.
