Question

If a business owner wanted to know the financial health of his company, which financial statement would he need to see?

a. Balance Sheet
b. Income Statement
c. Statement of Cash Flows
d. Statement of Retained Earnings

Answer 1

To gauge the financial health of a company, the business owner should examine the Balance Sheet, which lists assets, liabilities, and equity, thereby revealing the company's net worth.

Step-by-step explanation:

If a business owner wants to assess the financial health of their company, they should look at the Balance Sheet. The balance sheet is a financial statement that provides a snapshot of a company's financial position at a specific point in time. It lists the company's assets, liabilities, and equity, showing the net worth of the business which is the total assets minus total liabilities.

The balance sheet helps the owner understand what the company owns and owes, while also showing the invested capital. Bank capital, or a bank's net worth, can be found on a bank's balance sheet and operates on the same principles as any business balance sheet. It takes into account assets such as cash in the vaults and liabilities like money owed to creditors. Understanding these figures is crucial for making informed business decisions about the company's financial strategies and health.

Answer 2

The financial statement that a business owner would need to see to assess the financial health of his company is the Balance Sheet.

Step-by-step explanation:

The financial statement that a business owner would need to see to assess the financial health of their company is the Balance Sheet. A Balance Sheet provides a snapshot of a company's financial position at a specific point in time and includes information about a company's assets, liabilities, and equity. By examining the balance sheet, a business owner can determine the value of the company's assets, how much the company owes to creditors, and the owner's equity in the business.

For example, if a business owner wants to know how much money the company owns and what it owes, they can refer to the balance sheet. It will show them the amount of cash, inventory, equipment, and other assets the company possesses, as well as its liabilities like loans, accounts payable, and accrued expenses. By subtracting liabilities from assets, the owner can calculate the company's equity, which indicates the owner's stake in the business.