If a loan officer examines a borrower's current assets and current liabilities, they are assessing what aspect of the borrower?

When a loan officer examines a borrower's current assets and current liabilities, they are assessing liquidity. Liquidity refers to the borrower’s ability to meet short-term obligations, as it focuses on how readily available the borrower's assets are to cover their current liabilities. By analyzing these two aspects, the loan officer can determine if the borrower has sufficient liquid assets—like cash or accounts that can quickly be converted to cash—to satisfy immediate financial responsibilities.

The current assets provide insight into what resources are available for quick access, while current liabilities reflect the obligations that need to be met in the near term. A strong liquidity position is crucial for lenders to ensure that the borrower can manage their financial commitments without cash flow issues, making this assessment vital in the lending process.