Which financial statement provides a company's net worth?

Which financial statement provides a company's net worth?

• A. Income statement
• B. Balance sheet
• C. Cash flow statement
• D. Statement of changes in equity

Answer: (B)

The balance sheet provides a company's net worth, often referred to as shareholders' equity. This financial statement summarizes a company's assets, liabilities, and equity at a specific point in time. The fundamental equation of the balance sheet is Assets = Liabilities + Equity. By rearranging this formula, equity can be derived as the difference between total assets and total liabilities. This net worth reflects the remaining interest in the assets of the company after deducting its liabilities, providing valuable insights into the financial health and stability of the business. It is essential for stakeholders, including investors and creditors, to assess how much value remains for the shareholders after all debts and obligations are met. While the income statement shows a company’s profitability over a particular period, and the cash flow statement presents the inflow and outflow of cash, these do not directly represent net worth. The statement of changes in equity details the changes in equity over time but does not provide a snapshot of net worth at a specific point. Thus, the balance sheet is the key document for understanding a company's net worth.

The balance sheet provides a company's net worth, often referred to as shareholders' equity. This financial statement summarizes a company's assets, liabilities, and equity at a specific point in time. The fundamental equation of the balance sheet is Assets = Liabilities + Equity. By rearranging this formula, equity can be derived as the difference between total assets and total liabilities.

This net worth reflects the remaining interest in the assets of the company after deducting its liabilities, providing valuable insights into the financial health and stability of the business. It is essential for stakeholders, including investors and creditors, to assess how much value remains for the shareholders after all debts and obligations are met.

While the income statement shows a company’s profitability over a particular period, and the cash flow statement presents the inflow and outflow of cash, these do not directly represent net worth. The statement of changes in equity details the changes in equity over time but does not provide a snapshot of net worth at a specific point. Thus, the balance sheet is the key document for understanding a company's net worth.