Question

To determine a person's solvency, which financial document should be consulted? O cash flow statement O budget O balance sheet O credit report

Answer 1

The balance sheet should be consulted to determine a person's solvency, as it lists their assets, liabilities, and net worth.

Step-by-step explanation:

The financial document that should be consulted to determine a person's solvency is the balance sheet. A balance sheet is an accounting tool that lists a person's assets and liabilities, which can provide a snapshot of their financial health. It shows what a person owns (assets) and what they owe (liabilities), and the difference between the two is their net worth.

Answer 2

A person's solvency is best assessed by looking at their balance sheet, as it shows assets, liabilities, and net worth, which are key indicators of financial health.

Step-by-step explanation:

To determine a person's solvency, the financial document that should be consulted is the balance sheet. A balance sheet is an essential accounting tool that provides a snapshot of what an individual or entity owns (assets) and owes (liabilities), as well as their net worth (assets minus liabilities). When an institution like a bank considers lending money, it looks at the balance sheet to assess the financial health and solvency of the borrower. Credit checks are also conducted to review past borrowing and repayment behaviors. Furthermore, requiring a cosigner or collateral can be ways for a bank to mitigate the risk associated with a loan.