Balance sheet analysis is useful in assessing a firm's liquidity, which is the ability to
A) satisfy short-term obligations.
B) main profitable operations.
C) maintain past levels of preferred and common dividends.
D) survive a major economic downturn.

Question

Quizplus · Accepted Answer

Balance sheet analysis can provide information on a company's current assets and liabilities, which is useful in determining if the company has enough assets that can be turned into cash quickly to meet short-term obligations (such as paying off debt or paying suppliers). This is referred to as liquidity.

Balance Sheet Analysis Is Useful in Assessing a Firm's Liquidity