need help with BS MC question (1 Viewer)

[PG5]

the question is
1) The best measure of the current financial position of a business is a:
a. Cash flow statement
b. Revenue statement
c. Budget
d. Balance Sheet

i put d n i got it right.... but my friend from another school is arguing that it is not the 'best measure' of the financial position, she's arguing that it's the cash flow statement.

In the textbook, longman series, it says that the Balance Sheet is a sumarry of the financial posistion of the business at any given point in time.

So which is the 'best' measure?
ne ideas? arguments?

 

[bobo123]

cash flows are usually short term documents and thus cannot indicate an accurate financial position of a firm. Nor are they even prepared for that purpose. They are used to assist in dealing with short term finance shortfalls or surpluses.

if all else fails, tell her the textbook said so

 

[PG5]

Originally posted by bobo123

if all else fails, tell her the textbook said so

haha, i did... she just said the textbook was gay

 

[dudditz]

Who cares then, let her get it wrong, ain't your problem

 

[Weisy]

what exactly was her reasoning behind a cash flow statement being the best indication?

 

[PG5]

hmm... i'll get back to you on that when i talk to her again

correction: she's finished the hsc and she got a band 6 in business studies for the hsc...

 

[Juliet]

I agree with the textbook, Balance sheet.

 

[ben]

Big woop, she got band six. Maybe the ONLY thing stopping her from getting 100% was her lack of knowledge of financial statements.

 

[tammer]

hmm... i think you can see the consensus here. i would definately say the balance sheet, and who does she think she is arguing with:
1. the text book; and
2. your teacher
who both agree on the balance sheet as being the correct answer. just coz she got a band 6 doesnt mean she got the financial statements questions right

 

[PG5]

lol... but yeah, can anyone expand on bobo's explanation as to why the balance sheet is the answer. Agreeing with the textbook is not always a good idea, it's a matter of understanding the concept as well but i don't understand yet. I studied the textbook, longman series, and lost 4 marks coz of some confusing formula/concept! could've came =2nd... err.... So yeah, studying a range of textbooks is wiser!


Is it because balance sheets show the working capital ratio of the business, hence the liquidity? It shows if the business has enough assets to stay alive (pay off their debts). The financial position of the business is like liquidity and solvency... yeh? so balance sheet is the answer.
And
The cash flow statement shows how much profit is being earned at different periods of time? Because you can calculate the owner's equity ratio, net profit ratio and gross profit ratio? Hence, by calculating only the profits, it does not show the financial position of the business, only the profit margins of the business for the owners.

hmm... is this right? correct me if i'm wrong...

btw, ty for ur responses!

 

[AGB]

a balance sheet is now called a statement of financial position.....tel ur friend that john howard said so - then again, she just might say that he is gay too.....

also i dont agree that working capital is necessarily liquidity.....wot doz every1 else think???