Which financial statement would you consult to assess a company's liquidity at a specific date?

• A. Balance sheet.
• B. Income statement.
• C. Cash flow statement.
• D. Notes to financial statements.

Answer: (A)

Liquidity at a specific date is about whether a company has enough short-term resources to meet its near-term obligations. The balance sheet provides a snapshot of exactly that: it lists current assets such as cash, accounts receivable, and inventory, and current liabilities such as accounts payable and short-term debt, all as of a specific date. From these numbers you can assess liquidity with ratios like the current ratio (current assets divided by current liabilities) or the quick ratio, and you can see the working capital (current assets minus current liabilities). The other statements don’t show a date-specific snapshot: the income statement covers performance over a period, the cash flow statement tracks cash movements over time, and notes add details but aren’t the snapshot itself.