Balance sheet Balance sheet provides a basis for computing rate of return & evaluating the capital structure of the enterprise. It also helps users to assess a company’s liquidity, solvency & financial flexibility.The balance sheet provides information about the nature and amounts of investments in enterprise resources, obligations to enterprise creditors, and the owners’equity in net enterprise resources. That information not only complements information about the components of income, but also contributes to financial reporting by providing a basis for (1) computing rates of return, (2) evaluating the capital structure of the enterprise, and (3) assessing the liquidity and financial flexibility of the enterprise. Solvency: It refers to the ability of an enterprise to pay its debts as they mature. Current assets and liability of the company helps the users to assess the company’ solvency. Liquidity: Liquidity of the company will be assessing through the amount of time that is expected to elapse until an assets is converted to cash or liability has to be paid. Financial Flexibility: Financial flexibility is the ability of an enterprise to take necessary actions to change the amount and timing of cash flows. An enterprise with a high degree of financial flexibility is better able to survive bad times, to recover from unexpected setbacks, and to take advantage of profitable and unexpected investment opportunities. Generally, the greater the financial flexibility, the lower the risk of enterprise failure. Solution Balance sheet Balance sheet provides a basis for computing rate of return & evaluating the capital structure of the enterprise. It also helps users to assess a company’s liquidity, solvency & financial flexibility.The balance sheet provides information about the nature and amounts of investments in enterprise resources, obligations to enterprise creditors, and the owners’equity in net enterprise resources. That information not only complements information about the components of income, but also contributes to financial reporting by providing a basis for (1) computing rates of return, (2) evaluating the capital structure of the enterprise, and (3) assessing the liquidity and financial flexibility of the enterprise. Solvency: It refers to the ability of an enterprise to pay its debts as they mature. Current assets and liability of the company helps the users to assess the company’ solvency. Liquidity: Liquidity of the company will be assessing through the amount of time that is expected to elapse until an assets is converted to cash or liability has to be paid. Financial Flexibility: Financial flexibility is the ability of an enterprise to take necessary actions to change the amount and timing of cash flows. An enterprise with a high degree of financial flexibility is better able to survive bad times, to recover from unexpected setbacks, and to take advantage of profitable and unexpected investment opportunities. Generally, the greater .