Which document provides insight into a business's financial situation by listing assets and liabilities?

The statement of financial situation, often referred to as the balance sheet, provides a comprehensive view of a business's financial standing at a specific point in time. This document lists the company’s assets, which are resources owned by the business, and liabilities, which are obligations or debts the business owes to others. By balancing assets against liabilities, the statement offers insight into the company's net worth or equity—essentially what is owned versus what is owed.

Understanding this document is crucial for evaluating the financial health of a business. It allows stakeholders, such as investors and creditors, to assess the liquidity and solvency of the company. This information can inform decisions regarding investment or financing.

In contrast, a cash flow statement focuses on the inflows and outflows of cash over a specific period, showing how liquid the company is. An income statement, or profit and loss statement, details the revenues and expenses to show profitability during a certain timeframe but does not provide a snapshot of assets and liabilities. All these other documents serve important roles in financial analysis but do not encompass the complete financial situation as effectively as the statement of financial situation.