I was wondering if you could help me out with a financial statement question for a possible job interview? My question is if you were a bank and a company was trying to borrow money from you to purchase commercial real estate and you could only use one financial statement (income statement, balance, sheet, or cash flow statement), which financial statement would you choose? Thank you for your time.
Financial Statement Opinion
Answers
Anon
May I ask why you are limited to using only one statement?
1
Hello Len,
It's just a theoretical question that I may be asked during an interview.
My answer would be Cashflow statement. It starts with net income, but then shows the reality of how much cash is being generated from / used by the
The proper answer – “Each statement provides information that is not able to be gleaned from the other statements. As they are not interchangeable, it is not recommended to underwrite a loan with only one statement. That approach represents a
Sometime that answer to an interview question is simply – “The question makes no sense and this is why…”
1
I agree Regis...it reminds me of questions like this:
If you had to choose between breathing in and breathing out, what would you choose? aka polarity thinking.
Cash is king. The cash flow statement would be the one to use. It will reflect if the company is generating cash and not just book income. It will also reflect any good or bad trends in working capital
I'm with Regis, I would tell them the importance each financial statement can have in making a proper business valuation. They may ask the question hoping you will challenge it.
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