Why Is a Net Worth Statement Needed

question 11

Multiple Choice

Why is a net worth statement needed?

• A)To determine your net cash flow on an annual basis
• B)To measure your cash accumulation
• C)To measure the value of your assets minus debts
• D)To measure expenses and develop priorities

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Definitions:

Financial Statements

Reports that summarize the financial performance and position of a business, including the balance sheet, income statement, and cash flow statement.

Current Ratio

A measure used to evaluate a company’s liquidity and short-term debt-paying ability; computed by dividing current assets by current liabilities.

Vertical Analysis

A financial statement analysis method where each entry for each category is listed as a percentage of a base figure within the statement.

Horizontal Analysis

A financial analysis technique that compares line items in financial statements over different periods to identify trends.