the statement of financial position

 the statement of financial position

A balance sheet, also known as the statement of financial position, shows the financial situation of a business at a particular time. It does this by listing the company’s liabilities, assets, and equity as of a specific moment in time. When the economy is stable, investors are more concerned about companies’ growth in cash flow, earnings, and cash flow. However, in times of crisis, they pay attention to the statement of financial position, and this is because, on normal days, companies are not rewarded by the stock market for keeping in check their debt, pulling up cash for unforeseen calamities, and being overall conservative in their spending. Consequently, during a crisis, as they have now with the coronavirus pandemic, the balance sheet is and will be of importance (Francis & Gryta).

Question 2

Companies are now paying attention to the balance sheet during this crisis to track their financial position. Many companies are likely to go bankrupt during or after the pandemic since most of them have spent the last few years using debt to be able to support share buybacks. To avoid bankruptcy, strategic management must make sure that companies will be capable of surviving the coming recession. While many companies will take massive hits in their earnings and revenues, companies with a well laid out strategy plan will use their balance sheets to see them through this crisis. Companies with a steady cash position will be able to make procurements and purchases cheaply to help the companies from deteriorating when the companies’ survival comes into jeopardy (Francis & Gryta).

Question 3

The income statement and balance sheet are essential documents for evaluating companies’ performance and spending. If a company has a positive income statement, it indicates a steady financial position. An income statement shows the financial health of a company over a particular period and providing relevant information about sales, revenues, and expenses. As opposed to a balance sheet, an income statement helps in monitoring revenues and expenses and keeping costs under control. Investors are usually interested in the operating section of the profit and loss statement that shows whether a company is making profits or losses. From a strategic point of view, an income statement provides essential information to investors on the company’s management efficiency, and managers help in identifying sectors in a company that is under-performing for performance comparison within and with competitors (Francis & Gryta).

Question 4

A balance sheet is the implied opposite of an income statement. An income statement gives a business a picture of its performance over a period of time, while a balance shit gives a snapshot of a business’s liabilities and assets at a particular point in time. Right now, mainly due to the coronavirus pandemic, businesses are interested in balance sheets rather than income statements. Businesses are now engaged in keeping track of cash flows to maintain their relevancy in the economy. Companies are not currently interested in how they have been performing in the past; instead, their primary interest now in looking for ways the can remain afloat during and after the pandemic (Francis & Gryta).