Question

Rank the following in order of importance and why .

Income Statement, the Balance Sheet, and the Statement of Cash Flows

Answer 1

Ranking in order of importance is as follows-

A. Statement of cash flows- Statement of the cash flows is reflecting the ability of the company in order to generate the cash and it is also reflecting the liquidity on the part of the company in order to repay the creditors so it will be reflecting the solvency of the company in the long run and the ability of the company to survive through various economic scenario as the company will be having an adequate reflection of the cash as it is always said that cash is the king in overall business. Businesses which are generating higher amount of cash can survive and sustain through longer period of time and they can sustain through adversities.

B. Balance sheet- Balance sheet of the company will be reflecting the Assets and the liabilities of the companies and it will be reflecting the overall ownership of the Assets and the liabilities of the company along with the capital structure of the company so it will be providing the adequate idea about the strength on weakness of the company at a particular point of time

C. Income statement- income statement of the company is related to income and expenses of the company within a short span of time and it will be reflecting the profits of the company within this short span of time and it is not highly preferred by investors because it is not reflecting much of the information about sustainability of the company and it is just focused upon a profit statement in a certain period of time.