Final answer:
Excluding the statement of cash flows indicates the company is omitting the Statement of Cash Flows from its financial statements. This document is a key financial statement which provides vital information on the cash income and outgoings of a corporation. The assessment of loans in the secondary market is influenced by borrower reliability, profitability, and prevailing economic interest rates.
Step-by-step explanation:
Bonner Corporation has decided to exclude the statement of cash flows from its financial statements. This decision indicates a missing component within the set of financial statements that businesses typically prepare. The options provided show different types of financial statements, but since we are specifically talking about the statement of cash flows being excluded, the answer to the question is option 4, which is the Statement of Cash Flows.
The money listed under assets on a bank balance sheet may not actually be in the bank because banks use a portion of their deposits to extend loans and invest in various securities. This practice is known as fractional reserve banking. When you're evaluating loans to purchase in the secondary market, you'll consider factors like payment history, current interest rates, and the financial health of the borrower. If a borrower has been late on loan payments, the loan may be considered riskier, potentially leading you to pay less for it. Conversely, you'll likely pay more for a loan if the borrower has just declared a high level of profits, which suggests financial stability and a lower risk of default.
Interest rate fluctuations in the economy also impact the purchase price of loans in the secondary market. For example, if interest rates have risen since the origination of the loan, the loan's fixed rate may be less attractive, reducing its value. If interest rates have fallen, the opposite effect occurs, and the loan becomes more valuable since it likely has a higher interest rate than current market rates.