How do you know if a balance sheet is strong?
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Asked By: Timmy Konopelski
Date created: Sun, Apr 25, 2021 5:28 AM
Date updated: Fri, Jun 24, 2022 9:09 PM
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Top best answers to the question «How do you know if a balance sheet is strong»
A strong balance sheet indicates a company is liquid, which means it has enough cash on hand to handle its liabilities. Having a large amount of cash is not the only determining factor when deciding whether a balance sheet is strong. Many investors use liquidity ratios to determine the strength of a balance sheet.
The strength of a company's balance sheet can be evaluated by three broad categories of investment-quality measurements: working capital, or short-term liquidity, asset performance, and capitalization structure. Capitalization structure is the amount of debt versus equity that a company has on its balance sheet.