Florida Building Contractor Business/Finance Practice Exam

The financial statement that shows business equity is called what?

1. Income Statement

2. Cash Flow Statement

3. Balance Sheet

4. Profit and Loss Statement

The correct answer is: Balance Sheet

The financial statement that displays business equity is known as the Balance Sheet. This document provides a snapshot of the company's financial position at a specific point in time, outlining several key components: assets, liabilities, and equity. Equity is calculated by subtracting total liabilities from total assets, which gives an accurate picture of the net worth of the business. This is essential for business owners and stakeholders to assess the value of the company and understand how much of the business is financed through owner investments versus debt. The other options serve different purposes. The Income Statement reflects the company's profitability over a certain period, showing revenues and expenses but not detailing equity. The Cash Flow Statement tracks the cash generated and used during a specific period, focusing on cash movements rather than overall equity. The Profit and Loss Statement, although synonymous with the Income Statement in many contexts, also focuses on revenues and expenses without directly addressing equity. Understanding the differences among these documents aids business owners in making informed financial decisions.