What is the significance of balance sheet in Business Development?

Balance sheet is able to show you whether your business’s finances are accurately managed. For this reason, balance sheets are crucial for the strategic financial planning of any business.

A balance sheet, also known as a “statement of financial position,” reveals a company’s assets, liabilities and owners’ equity (its net worth). It, together with the income statement and cash flow statement, makes up the cornerstone of any company’s financial statements. Balance sheet tells you what you have invested in and how you have financed these investments.

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The selection of the appropriate analytical methods and techniques for assessing a business, or your investment, is crucial to correctly assessing the performance. The starting point is balance-sheet.

One way to think of the balance sheet is that it can inform us about the kinds and degrees of financial risk an organization faces as it delivers on its artistic mission. In this context, risk — and its converse, opportunity — has three distinct levels:

• Liquidity: Does an organization have adequate access to cash to meet its operating needs?
• Adaptability: Does an organization have flexible funds that can allow it to make adjustments as its circumstances change?
• Durability: Does an organization have access to funds sufficient to address the range of needs that it may face in future years?

Addressing liquidity is necessary, although for many organizations it can be quite difficult. Healthy liquidity requires an accumulation of annual operating surpluses (occasional deficits may be planned or unavoidable) and, where appropriate, a line of credit.

Funding adaptability and durability are more complex, since surpluses, when they exist and can be set aside as reserves, are rarely sufficient to do the job. Periodic infusions of contributed capital and strategic use of long-term debt are typical strategies to fund long-term needs, which can range from investments in technology to making major repairs on a building to pursuing new or improved ways of generating revenue.

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Agreed with both answers given by

Mr.: Jetley & Mr.:Vrindavan as well too

I'm learning from the experts here on the significance of balance sheet.