Asked by: Navdeep Lezziasked in category: General Last Updated: 24th February, 2020
What is the meaning of statement of financial position?
Also, why is the statement of financial position important?
Statement of Financial Position, also known as the Balance Sheet, presents the financial position of an entity at a given date. Statement of Financial Position helps users of financial statements to assess the financial soundness of an entity in terms of liquidity risk, financial risk, credit risk and business risk.
One may also ask, what is a classified statement of financial position? A classified balance sheet is a financial statement that reports asset, liability, and equity accounts in meaningful subcategories for readers' ease of use. In other words, it breaks down each of the balance sheet accounts into smaller categories to create a more useful and meaningful report.
Similarly, how do you read a statement of financial position?
Let's take a look.
- Start with the Balance Sheet.
- Current Assets and Liabilities.
- The Current Ratio.
- Non-Current Assets and Liabilities.
- Financial Position: Book Value.
- Market-to-Book Multiple.
- The Bottom Line.
What are the two format of statement of financial position?
The structure of the statement of financial position is similar to the basic accounting equation. For a corporation the format will be: Assets = Liabilities + Stockholders' Equity. A nonprofit organization's format will be: Assets = Liabilities + Net Assets.