the prudence principle, etc. To finish with the aspects here referred to as "objective", we have summarize in short the practical side of the balance sheet. No matter how often it is drawn, and what of the two popular forms it is presented in, the balance sheet, as known, consists of three major parts:assets - or what the firm possesses and has the right receive in future;liabilities - or what the firm's obligations are; shows also how many of these should be returned in the short-run, and how many the enterprise can employ in the long-run;owner's equity - the firm's capital, it can be also figured as the differense between assets and liabilities. To summarize the theoretical and practical essense of the balance sheet, we can use another contemporary definition of it given by A. Belkaouli in "Accounting theory": "The balance sheet measures the financial positions at a point in time". I think the arguments of the author are clear: if we assume that the current financial position can be described with the figures of the firms' possessions and obligations, listed by types and amounts than we would have to agree that the balance sheet gives us this information.Obviously, being an indicator of the enterprises' financial position, the balance sheet is a useful and powerful tool in the hands of managers, financial analysts and external users. Combined with the data on other financial statements it forms different ratios (like short-term liquidity ratios, short- and long- term solvency ratios, asset utilisation ratios and many others), which are the basis of each financial analysis. It is these data that can tell you if a company has enough money to continue to fund its own growth or whether it is going to have to take on debt, issue debt, or issue more stock in order to keep on keeping on. Does a company have too much inventory? Is a company collecting money from its customers in a reasonable amount of time? Once again, it is the balance sheet...
