- It shows the financial position of the organization for a certain period by showing details about capital, assets and liabilities.
- It helps to test the liquidity position of the organization by providing necessary infomation for the calculation of liquidity ratios.
- It also helps to know solvency position i.e., long term loan paying ability of a firm.
- It shows capital structure i.e. the position of owner's capital, shareholder's capital and borrowed capital of a firm.