NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Evaluating the Financial Position of Clients
While preparing a client's balance sheet, an adviser should classify the client's outstanding home loan as which of the following?
An outstanding home loan is a long-term liability because it is an obligation to be repaid over many years. It is not an asset or income, and its instalments are committed outflows rather than discretionary expenses.
- AA current asset
- BA long-term liabilityCorrect
- CAnnual income
- DA discretionary expense
Explanation
A home loan is repaid over many years, so it is a long-term liability on the balance sheet. It is an obligation, not an asset or income, and EMIs are fixed commitments rather than discretionary spending.
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