Final answer:
Deferred revenue reporting on a balance sheet represents an increased liability (option a), reflecting money received for services not yet performed. Banks might not have all the assets in cash as they loan it out, creating receivables. In the secondary loan market, the price paid for loans is influenced by the borrower's payment history and changes in economy-wide interest rates.
Step-by-step explanation:
A possible ramification of deferred revenue reporting is increased liabilities on the balance sheet. This occurs because deferred revenue is money received by a company for goods or services not yet delivered or performed, which is recognized as a liability. It is not an expense on the income statement, but a liability on the balance sheet.
As the company delivers goods or services, the liability decreases and the revenue is recognized on the income statement. This impacts the cash flow statement as well, where you often see higher cash flow from operating activities due to the cash received prior to the revenue being earned.
Regarding the money listed under assets on a bank's balance sheet, it may not actually be in the bank because banks use much of their deposits to provide loans to other customers, which become assets to the bank in the form of loan receivables. The cash is then circulating in the economy.
In buying loans in the secondary market:
- You would pay less for a loan if the borrower has been late on loan payments, due to increased risk of default.
- If interest rates have risen, existing loans with lower rates become less attractive, you might pay less for them.
- If the borrower is a firm that has just declared high profits, you might pay more due to their increased ability to repay.
- If interest rates have fallen, existing higher-rate loans are more valuable, and you might pay more.