How does information from the balance sheet help users of the financial statements?
The balance sheet provides information about the nature and amounts of investments in enterprise resources, obligations to enterprise creditors, and the owners' equity in net enterprise resources. That information not only complements information about the components of income but also contributes to financial reporting by providing a basis for
(1) computing rates of return,
(2) evaluating the capital structure of the enterprise, and
(3) assessing the liquidity and financial flexibility of the enterprise.
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