Final answer:
Bankers should examine the operating activities and financing activities sections of the Statement of Cash Flows to assess a company's cash generation and its debt management, which indicates its ability to repay a loan. High profits enhance a firm's likelihood of repaying its debt. Economic conditions, like falling interest rates, can also affect loan value.
Step-by-step explanation:
A banker contemplating a loan to a company should primarily focus on the operating activities section of the Statement of Cash Flows to determine the company's ability to generate cash from its core business operations, which is vital for repaying the loan. Furthermore, the financing activities section is also important because it provides insights into the company's borrowing and repayment activities, including interest payments, which is essential when assessing the firm's debt management capabilities. A firm with a record of high profits is more likely to be seen as capable of servicing its debt, leading the banker to have more confidence in the firm's ability to repay the loan.
It is also worth considering the broader economic conditions. If interest rates in the economy have fallen after the loan was issued, the existing loans with higher interest might become more valuable, potentially affecting the willingness of bankers to negotiate terms or refinancing options.