Well, to me balance sheets sing. Especially with their accompanying notes.
But they have to be taken in the context of the industry and the stage of development of the company. A bank is different to a miner, a producer will be different to an explorer. A tech company’s entirely dependent on the tech.
So, does it promote reality?
“support or actively encourage (a cause, venture, etc.); further the progress of.”
Does a balance sheet do that? They are described as a photograph of the company at a particular date. Compared to the profit and loss and cash flow statements which are a compilation over a period of time, balance sheets are more precise. It is easier to verify the numbers from an audit point of view, and it’s the latest representation of the company position.
So if a balance sheet gives positive vibes, it is more likely to promote the company, being the latest, most precise indicator of the company’s position than the P&L and cash flow.
If it gives negative vibes, it could promote the company’s bankruptcy. A self fulfilling prophecy.
