What does the Balance Sheet report?

• A. report of a company's financial worth in terms of book value
• B. breaks down the revenue that a company earns against the expenses involved in its business to provide net profit or loss
• C. shows the cash inflows and outflows during a period
• D. reports a company's market capitalization

Answer: (A)

The balance sheet is a snapshot of a company’s financial position at a specific date, listing what it owns (assets) and what it owes (liabilities), with the owners’ claim (equity) on the remaining assets. This arrangement shows the book value of the company, since assets minus liabilities equal equity. It’s the clear way to express the company’s financial worth in accounting terms. It isn’t about profits or losses (that’s shown on the income statement), nor about cash movements over a period (that’s the cash flow statement), and it doesn’t reflect market value or market capitalization.