Final answer:
Interest receivable is recorded as an asset on the Balance Sheet (BS) as it signifies future economic benefits. A firm with a good profitability track record can borrow funds easily, and interest rates have a significant impact on the valuation and attractiveness of financial assets.
Step-by-step explanation:
The question revolves around where interest receivable would appear in financial statements. Interest receivable is the income that has been earned by a company but has not yet been received in cash or other assets. Therefore, the correct answer is a)BS which stands for Balance Sheet. Interest receivable is an asset because it represents future economic benefits to the company.
Discussing the terms mentioned in the question, when a firm borrows money, it typically does so by either taking out a loan with a bank or issuing bonds. The firm's ability to pay interest and repay the loan primarily depends on its profitability and revenue generation.
Interest rates significantly influence the value of financial assets, including how much one would be willing to pay for a loan in the secondary market. For example, if interest rates fall, existing loans with higher rates become more valuable. Conversely, if a borrower has a history of late payments, the loan would be viewed as riskier, and its value would be less.