Final answer:
Option b, which suggests that the statement of cash flows provides a measure of the future obligations of the company, is not correct. This statement is more about historic cash transactions rather than future commitments, which are typically disclosed in the balance sheet and its notes.
The correct option is provides a measure of the future obligations of the company.
Step-by-step explanation:
The statement of cash flows is a critical financial report used to track the cash inflow and outflow of a business. It has multiple applications, but it does not directly provide a measure of the future obligations of the company. This is because it primarily looks at past cash transactions to indicate liquidity and solvency but does not account for future commitments that aren't yet due or reported.
That said, option b. provides a measure of the future obligations of the company, is not a use of the statement of cash flows. Instead, future obligations are typically found on the balance sheet and in the notes to the financial statements.
When assets are listed under a bank's balance sheet, they may not represent actual cash in the bank since banks operate on a fractional reserve basis, meaning a portion of deposits is held in reserve while the rest is used for lending and other investments. As for purchasing loans in the secondary market, a loan with a borrower who has late payments may be worth less due to higher risk. If the economy's interest rates have risen, a loan locked at a lower rate becomes less attractive and thus might be bought for less. Conversely, if interest rates have decreased, a loan with higher interest becomes more valuable. A firm declaring high profits could mean the loan is less risky, making it worth more.