another unit 15 question - sorry

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taskey
taskey Registered Posts: 1,800 Beyond epic contributor 🧙‍♂️
if given a balance sheet and a p&l for 2 previous years and a forecasted one for next year, what are the limitations on the data provided.

I cannot see it in my bpp book, and am probably being really dense, but i cannot think what they want from me.

i am thinking that if someone was presenting a balance sheet to me, they might be "making" the forecasted one slightly more attractive to me if they were asking for credit, is this what they mean?

HELP!!!!

Tracy

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  • Arina
    Arina Registered Posts: 18 New contributor 🐸
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    what these data required for? for credit facilities to the client or for something else? if for credit - then may be the limitation is an absence of other documents such as refferences? or "if given a balance sheet and a p&l for 2 previous years and a forecasted one for next year" what about the current year?
  • sdv
    sdv Registered Posts: 585 Epic contributor 🐘
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    taskey wrote: »
    if given a balance sheet and a p&l for 2 previous years and a forecasted one for next year, what are the limitations on the data provided.

    I cannot see it in my bpp book, and am probably being really dense, but i cannot think what they want from me.

    i am thinking that if someone was presenting a balance sheet to me, they might be "making" the forecasted one slightly more attractive to me if they were asking for credit, is this what they mean?

    HELP!!!!

    Tracy

    A forcast P&L and BS are generally very optimistic.

    A bank manager wanting to decide objectively to grant a loan or not, will be basing his decision on incorrect financial statements. Interest cover may be too high, profit margin ratio much better then the actual ratio, current ratio much improved, gearing lower, creditor and debtors days witin the prescribed limits..............


    the same applies, if the the client is applying for extended credit from his supplier,


    Investors will happyly invest under misrepresentation

    etc
  • taskey
    taskey Registered Posts: 1,800 Beyond epic contributor 🧙‍♂️
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    brilliant, thanks both of you

    Tracy
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