Balance Sheet and Income Statement Research Paper

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Total Length: 1030 words ( 3 double-spaced pages)

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Balance Sheet

Question/Statement: Select either the balance sheet or income statement and explain how the use of it may be applied to your everyday life.

The balance sheet may be applied to everyday life in that it can be used to assess past performance, as well as to plan for future undertakings. If, for example, an individual used one's birthday as the balance sheet statement date, then the balance sheet would show assets accumulated up to that point, such as one's bank accounts, furniture, computers, 401K, equity in one's house and/or car and so forth. The individual's liabilities would include one's mortgage and car payments, credit card balances, student loans. The difference between total assets and total liabilities equals the individual's net worth.

The balance sheet may be used to evaluate an individual's performance in everyday life, for example, to see how well certain goals have been met. If, for example, an individual planned to save $25,000 by his or her thirtieth birthday, then the balance sheets shows how close he or she has come to that goal; or, if the goal has been met, or turns out to be unrealistic, the balance sheet can indicate that it is appropriate to pursue another goal. Similarly, if someone chose to use the balance sheet as a planning tool, for example, deciding to pay off one's student loans in a specified time period, then the balance sheet can be used to decide what strategy one uses to achieve that goal. The balance sheet can indicate the need to cut back on other expenses, like entertainment, or to increase his or her income by getting a second job in order to satisfy the requirements to pay off the student loan in the intended timeframe.

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In both scenarios, the information included in a balance sheet is used to inform the individual's decisions in the course of evaluating past performance or planning the future.

Question/Statement: Using the same concept selected above, discuss how a business manager may benefit from an understanding of this statement.

The balance sheet is a financial statement that provides a picture of a business at a given point in time, much like a snapshot. The balance sheet summarizes what a business owes and is owed as of a specific date. It shows both how a business is being funded, as well as how the organization uses those funds (Business Link, n.d.).

A balance sheet provides the following indications:

How solvent a business is

How liquid its assets are, that is, what amount is in cash or cash equivalents, or can be easily converted into cash, such as stocks or bonds

How the business is financed

How much capital is being used (Business Link, n.d.).

By understanding the balance sheet, a business manager may use it for several purposes. The balance sheet provides information that help investors, creditors and shareholders assess the worth of the business at a given moment, while at the same time giving business owners information that can be used for analyzing and improving the management of the business. If a company is trying….....

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"Balance Sheet And Income Statement" (2011, August 14) Retrieved July 3, 2025, from
https://www.aceyourpaper.com/essays/balance-sheet-income-statement-117642

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"Balance Sheet And Income Statement" 14 August 2011. Web.3 July. 2025. <
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"Balance Sheet And Income Statement", 14 August 2011, Accessed.3 July. 2025,
https://www.aceyourpaper.com/essays/balance-sheet-income-statement-117642
   

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