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Banking: A Balance Sheet and an Income Statement
Considering the specifics of the question conditions, I would choose a balance sheet to be conducted if only one form of the financial statement was possible. The relevant criterion mentioned concerned the potential for credit extension towards suppliers by a total of 60 days. An income statement would therefore not be suitable for the relevant financial analysis in this case. It generally provides a list of current incomes and expenditures. One might format an income statement to cover different periods, and it is an essential form of analysis to assess an organizations liquidity. Nevertheless, when compared to a balance sheet, an income statement presents a less define an incomplete type of analysis.
The balance sheet depicts the assets and liabilities the company possesses, as well as their origins, sources of financing, and the relevant equity. It thus creates an overall financial profile of an organization, its sustainability, and capacity to engage in risks of credit extension. A payment extension granted to the suppliers can be considered a form of a loan and would therefore be placed under the liabilities term. The delicate balance between liabilities, assets, and indicator performance should be taken into account when estimating the state of the firms account (Boeckx, Dossche & Peersman, 2017). Balance sheets are generally close to snapshots in terms of the period of their relevancy, but an insight into the state of affairs can always be arranged quickly. Such a sneak peek into the general state of all relevant financial affairs could contribute to a clients better understanding of the industry. Then, it would be much easier for responsible financial managers to determine whether a society could or should extend the credit to one of its suppliers.
Reference
Boeckx, J., Dossche, M., & Peersman, G. (2017). Effectiveness and transmission of the ECBs balance sheet policies. International Journal of Central Banking, 13(1), 297-333.
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