Are income statements and balance sheets any use to a lender's decisions when they only relate to the past?

Question

Note, LENDER, not other users, just lenders (ie banks)

Answer 1

They are an indication of the company's profitability and management prowess.
They define working capital and debt position.
They are very important ...... especially if they are audited statements.
Company prepared statements are somewhat less reliable.

Answer 2

Yes, these statements are very useful to a lender. As the balance sheet shows the businesses assets and liabilities at a certain time this and income statements show the profitability of the business for the last statement period. these two statements together give some indication of a businesses ability to continue trading into the future and it's ability to service any debts that it has or may have. The lender will probably also require future budgets and statements detailing how you intend to spend the loaned money and how it will help your business

Answer 3

of course. very useful although they relate to the past. they are statements that show the assets and liabilities of the company. there operations too. the lender will know if the company can pay what they are borrowing based on past financial reports of the company. from there you would know if the company has many liabilites and that if their income or assets are enough to pay all their obligations. a lender should be able to analize first the financial statement of the company before lending money.

Answer 4

Absolutely, they give a determination of the businesses' success over time. How better to determine whether the loan would be a good investment or not?

Answer 5

Yes.

Answer 6

No.