Question

An investor wishes to assess a company’s financial position at the end of the period. Which financial statement would the investor probably examine? The statement of cash flows The income statement The balance sheet The statement of retained earnings

Answer 1

The investor would probably examine the balance sheet.

Explanation:

The balance sheet, which is one of the three fundamental financial statements of an individual or a business provides a detailed "snapshot photo" of one moment in time for the whole business entity. It indicates the assets, liabilities, and equity of the business.

Balance sheet can be created in two forms namely,

• Report form
• Account form

The fundamental equation for the computation of equity in a balance sheet is as follows,

$\text{Assets - Liabilities = Equity}$

It has two sides. One side represents all the assets of the company and the other sketches all the shareholder's equity and liabilities of the company.