Question

From the balance sheet of a company, it is possible to: 

(a) judge the extent of profitability of this company 

(b) assess the profitability and size of the company 

(c) determine the size and composition of the assets and liabilities of the company 

(d) determine the market share, debts and assets of the company

Answer 1

(c) In financial accounting, a balance sheet or statement of financial position is a summary of the financial status of an organisation which can be a sole proprietorship, a business partnership or a company. Assets, liabilities and ownership of equity are listed as on a specific date, which is normally the end of the financial year. A balance sheet is the “snapshot of a company’s financial condition”.