Question

a. How does information from the balance sheet help users of the financial statements?

b. How does information from the balance sheet help users of the financial statements?

c. What are the major limitations of the balance sheet as a source of information?

d. Discuss at least two items that are important to the value of companies like Intel or IBM but that are not recorded in their balance sheets. What are some reasons why these items are not recorded in the balance sheet?

Answer 1

Date wat provides i The horhose of interested parties fans 147 lg Information from the of the finarid statements - 16 Balore sheet alone de information needed and you might have to look Bakre sheit heln evaluating the capital structure of the enterprise a basis for computing retes of return in Andyst use it to assess a compongs liquidity solvency and findlich flatibility. balone sheet is to give idea of the company's finarial position, in addition to displaying what the company auns cold ones. rivo Income stoverment is also important because it provides investors and creditors with information that helps them predict the ald mostonity of future esh flas above (referred to hat la)]. Major limitations of the Belenu that are are generally historical and not at not provide all of the mount, thiring day 16 Some Charc) a) The value stated fair value. in other financial Statements. fer Gillary infusieties

Page No. Date 1 1 It does let down the allet business has but it doesn't tell how much money those assets an generate in the future. Ana) Jont ventury, operating leses en. There are very important to the value of compris like Intel or IBM but that recorded in their Baloke sheets. These are off - balonce sheet itens. Although not recorded on the bolache Sheet, they are still assess and liabilities of the company on و typically those There are because these items are oured by a direct obligation of the company for exemple, when line securitized and sold off os inwestments the secured delet is often bept off the bank's books. The proctice of off - balance sheet finning uneler increasing semuting a number of cuanting scandals revealed the mis - use of the proctice.