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Answered 2011-02-09 12:49:45

The purpose of a firms balance sheet is to give you some insight into the financial health of the firm. By listing all their assets and liabilities this allows current/potential investors to see how the firm is doing, how they are in terms of meeting their debt obligations, the amount of leverage in the firm. As well the firms balance sheet is very useful to help calculate financial ratios, and to perform forecasts.

The important thing to keep in mind is that while the firms balance sheet is part of their annual financial statements it must be considered in combination with many other documents such as the notes and the income statement to give you a complete picture of the firms situation.

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