Question

Which of the following statements about the balance sheet are true? (Select all that apply.)Check All That ApplyA classified balance sheet to provide useful information about liquidity and long-term solvency.A classified balance sheet to provide useful information about liquidity and long-term solvency.Liquidity refers to an assessment of whether a company will be able to pay all its liabilities.Liquidity refers to an assessment of whether a company will be able to pay all its liabilities.Although many valuable resources are not recorded as assets in the balance sheet, these resources are reflected in the company’s book value.Although many valuable resources are not recorded as assets in the balance sheet, these resources are reflected in the company’s book value.The less financial flexibility, the more risk there is that an enterprise will fail.The less financial flexibility, the more risk there is that an enterprise will fail.

Answer 1

A classified balance sheet offers insights into a company's liquidity and solvency, and lesser financial flexibility increases business risks. Meanwhile, valuable off-balance sheet resources do not affect the book value reported on the balance sheet itself.

Step-by-step explanation:

The statements about the balance sheet that are true include: A classified balance sheet provides useful information about liquidity and long-term solvency. Liquidity is an assessment of whether a company can pay all its liabilities. Also, it's true that the less financial flexibility a company has, the more risk there is that the company will fail.

While valuable resources that are not recorded as assets do not appear on the balance sheet, it's important to note that these resources do not contribute to the company's book value on the balance sheet. Book value is calculated based on the reported assets minus the liabilities, not including intangible assets or other valuable resources that aren’t recorded on the balance sheet.

Answer 2

These statements are true:

Classified balance sheet to provide useful information about liquidity and long-term solvency.

From balance sheet information, liquidity financial ratios can be made, like current ratio (current assets / current liabiliies), or the acid test (Current assets - inventory / current liabilities).

Liquidity refers to an assessment of whether a company will be able to pay all its liabilities.

Liquidity can be defined as the amount of liquid assets that a company has. Liquid assets are those that can be easily sold and bought in the market without a loss of value. Cash, and cash equivalents are the most important liquid accounts. If a firm has a lot of cash, it is likely to have enough liquidity to pay off its debts in the future.

The other two statements are wrong.