Question

The balance sheet contributes to financial reporting by providing a basis for all of the following except determining the increase in cash due to operations. computing rates of return. evaluating the capital structure of the enterprise. assessing the liquidity and financial flexibility of the enterprise.

Answer 1

Determining the increase in cash due to operations

Step-by-step explanation:

Balance sheet shows the position of assets and liabilities of an organization as on a particular date.

It helps in computing return on assets, investments and earnings as all the inputs are derived from balance sheet accounts.

Capital structure can be evaluated as the break-up is given in the equity and liabilities section of the balance sheet.

Similarly, liquidity and financial flexibility can be assessed with the help of balance sheet.

balance sheet, however, does not help in determining increase or decrease in cash from operations. Cash flow statement shows the same. Cash flow statement shows cash generated or used from operating, investing and financing activities during the year.