Question

Marin Company has decided to expand its operations. The bookkeeper recently completed the following balance sheet in order to obtain additional funds for expansion. Cash $234,000. What is the purpose of completing the balance sheet?

1) To calculate the total assets of the company
2) To determine the liabilities of the company
3) To assess the financial position of the company
4) To identify the sources of funds for expansion

Answer 1

The balance sheet's purpose is to assess a company's financial position by detailing assets and liabilities, thus revealing net worth and providing a financial snapshot to investors or lenders for expansion funding decisions.

Step-by-step explanation:

The purpose of completing a balance sheet is to assess the financial position of a company. This accounting tool lists assets, such as cash, properties, and equipment, and liabilities, including loans and accounts payable. The balance sheet also reveals the company's net worth, calculated as the total value of assets minus the total liabilities.

For a company like Marin Company looking to expand, the balance sheet provides a snapshot of financial health to potential investors or lenders, indicating how well the company manages its resources and debts. Therefore, the purpose of the balance sheet, in this case, is to serve as a financial statement that offers comprehensive insight into the company's financial state and its ability to fund expansion efforts.