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3. Why is the liabilities section of the balance sheet of primary significance to bankers?
3. Why is the liabilities section of the balance sheet of primary significance to bankers? As a lender of money, the banker is interested in the priority his/her claim has on the company"s assets relative to other claims. Close examination of the liability section and the related footnotes discloses amounts, maturity dates, collateral, subordinations, and restrictions of existing contractual obligations, all of which are important to potential creditors. The assets and earning power are likewise important to a banker considering a loan. How are current liabilities related by definition to current assets? How are current liabilities related to a company"s operating cycle?
