Question:
The balance sheet is useful for analyzing all of the following except:
a. liquidity
b. financial flexibility
c. profitability
d. solvency
Answer:
The correct option is c. profitability.
Explanation:
The balance sheet is a useful tool for understanding how much money a company has, how much it owes to others, and how much is owned by shareholders. It can help you understand if a company can easily pay off its short-term debts, respond to unexpected expenses or opportunities, and meet its long-term obligations. However, when it comes to understanding how much profit a company is making, it’s better to look at the income statement, which shows how much money the company earned and spent over a certain period of time.
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