A customer asks you to extend credit to them for a major purchase. You are revie

Question

A customer asks you to extend credit to them for a major purchase. You are reviewing the customer's balance sheet. It reflects $100,000 of cash $100,000 of Accounts Receivable end $50.000 of inventory for a total of $250,000 of current assets. It also reflects $400.000 of long term assets for a total of $700,000 in assets. They have $50,000 of short term liabilities, $400,000 of long term liabilities (total liabilities of $450,000) and $450,000 of equity. Which of the following would you most likely conclude after your review?

Explanation / Answer

The correct answer is option D.

The totals of the balance sheet does not reflect accurate as the total assets showing $750,000 and the total equity and liabilities showing $900,000. thus, the given information is not accurate and lot of observation needed of any information given by the customer as the information gives is a fake information and the you cant believe the customer based on the financial information given.

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