Florida Building Contractor Business/Finance Practice Exam

What does a balance sheet primarily display?

1. Liabilities, assets and net worth

2. Income and expenses over a period

3. Projected revenue and expenses

4. Cash flow from operating activities

The correct answer is: Liabilities, assets and net worth

A balance sheet primarily displays a company's financial position at a specific point in time by outlining its liabilities, assets, and net worth (equity). Assets represent what the company owns, such as cash, inventory, and property. Liabilities signify what the company owes, including loans and accounts payable. The net worth, also known as shareholders’ equity, is calculated by subtracting total liabilities from total assets, indicating the value that remains for the owners after debts are settled. The balance sheet provides a snapshot of financial health, helping stakeholders understand the resources available to the company and its obligations. In contrast, the other options refer to different financial statements. The income statement tracks income and expenses over a period, showcasing profitability. Projected revenue and expenses relate to budgeting and forecasting, providing future expectations rather than a current financial position. Cash flow statements detail the cash inflows and outflows from operating activities, focusing on cash management rather than the overall financial structure.