The statement of financial position provides insight into the liquidity of the business. This means that
A)the ability of the business to pay its long-term debts.
B)the ability of the business to pay dividends.
C)the ability of the business to pay its short-term obligations with current assets.
D)the ability of the business to purchase new long-term assets.

Question

Quizplus · Accepted Answer

The statement of financial position, also known as the balance sheet, shows the assets, liabilities, and equity of a business at a particular point in time. It provides insight into the liquidity of the business by showing the amount of current assets available to pay short-term obligations. Long-term debt payments, dividends, and purchases of long-term assets are not directly related to liquidity, so options A, B, and D are not the best choices.

The Statement of Financial Position Provides Insight into the Liquidity