Florida General Contractor Practice Exam

What financial statement summarizes a company's assets, liabilities, and equity at a specific point in time?

1. Income Statement

2. Cash Flow Statement

3. Balance Sheet

4. Statement of Changes in Equity

The correct answer is: Balance Sheet

The correct choice is the Balance Sheet, as it is specifically designed to provide a snapshot of a company’s financial position at a particular moment in time. This statement details the company’s assets, which are what it owns; liabilities, which are what it owes; and equity, which represents the ownership stake in the company. By balancing these elements (i.e., assets = liabilities + equity), a balance sheet offers a clear view of financial health and stability, allowing stakeholders to assess the company's financial leverage and cash management. In contrast, the Income Statement focuses on a company’s revenues and expenses over a period of time, providing insight into its operational performance but not its financial position at a specific point. The Cash Flow Statement tracks the inflows and outflows of cash, illustrating how well a company can manage its cash effectively but does not summarize assets, liabilities, and equity. Lastly, the Statement of Changes in Equity details the movements in equity during a certain period, including new investments and retained earnings, but it does not encapsulate the entire financial status with a singular snapshot like the balance sheet does.