Which financial statement shows a company's net worth or equity?

Which financial statement shows a company's net worth or equity?

• A. Income statement
• B. Balance sheet
• C. Cash flow statement
• D. Profit and loss statement

Answer: (B)

The balance sheet is the financial statement that showcases a company's net worth or equity. It provides a snapshot of what the company owns (assets) and what it owes (liabilities) at a specific point in time. The equity section of the balance sheet indicates the residual value of assets after all liabilities have been deducted, which directly reflects the owner's stake in the company and is often referred to as net worth. In contrast, the income statement details the company's revenues and expenses over a certain period, showing the operational performance and profitability rather than the overall financial position. The cash flow statement tracks the flow of cash in and out of the business, focusing on liquidity rather than overall worth. The profit and loss statement, which is synonymous with the income statement, also emphasizes certain periods' operational results instead of the financial position at a specific moment.

The balance sheet is the financial statement that showcases a company's net worth or equity. It provides a snapshot of what the company owns (assets) and what it owes (liabilities) at a specific point in time. The equity section of the balance sheet indicates the residual value of assets after all liabilities have been deducted, which directly reflects the owner's stake in the company and is often referred to as net worth.

In contrast, the income statement details the company's revenues and expenses over a certain period, showing the operational performance and profitability rather than the overall financial position. The cash flow statement tracks the flow of cash in and out of the business, focusing on liquidity rather than overall worth. The profit and loss statement, which is synonymous with the income statement, also emphasizes certain periods' operational results instead of the financial position at a specific moment.