Final answer:
Notes payable are classified on the balance sheet, which is part of a company's financial statements. Other elements relevant to the financial industry include the balance of payments, balance of trade, and the processes of securitization and bank runs. The value of loans in the secondary market is influenced by borrowers' creditworthiness and changes in the overall interest rates.
Step-by-step explanation:
The student's question focuses on where notes payable would be classified in financial documentation. Notes payable are categorized on the balance sheet (BS). They are not included in the income statement (IS), statement of stockholders' equity (SE), or the statement of cash flows (CF).
Regarding the other references, the balance sheet is a financial statement that presents a company's financial position at a specific point in time, listing assets, liabilities, and equity. The balance of payments is a record of all transactions made between one particular country and all other countries during a specified period of time. The balance of trade is the difference between the value of a country's exports and imports of goods and services, while a bank run occurs when a large number of customers of a bank or another financial institution withdraw their deposits simultaneously due to concerns about the bank's solvency. Securitization is the process of transforming loans or other financial assets into securities.
As for the hypothetical scenarios regarding the purchasing of loans in the secondary market:
- Buyers will likely pay less for a loan if the borrower has been late on loan payments because it suggests a higher risk of default.
- If interest rates in the economy have risen since the loan was made, buyers may pay less because the existing loan has a relatively lower interest rate than new loans, making it less attractive.
- If the borrower is a company that has declared high profits, buyers might be willing to pay more due to the lowered risk of default.
- Conversely, if interest rates have fallen, an existing loan with a higher rate is more valuable, so a buyer might be willing to pay more.