Using Financial Reports: Evaluating the Reliability of a Balance Sheet Frances Sabatier asked a local bank for
Question:
Frances Sabatier asked a local bank for a $50,000 loan to expand her small company. The bank asked Frances to submit a financial statement of the business to supplement the loan application. Frances prepared the following balance sheet.
Required:
The balance sheet has several flaws. However, there is at least one major deficiency. Identify it and explain itssignificance.
Transcribed Image Text:
FS COMPUTING Balance Sheet June 30, 2012 Assets $ 9,000 Cash and investments Inventory Equipment Personal residence (monthly payments, $2,800) Remaining assets 30,000 46,000 300,000 20,000 $405,000 Total assets Liabilities Short-term debt to suppliers Long-term debt on equipment $ 62.000 38,000 Total debt 100,000 Stockholders' Equity 305,000 Total liabilities and stockholders' equity $405,000
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