A statement of condition is a summary of the financial state of a business or entity divided into assets and liabilities. It determines net worth and can be required for loans or mergers. It is also helpful for periodic reviews of a company’s financial situation.
A condition statement is a document that summarises the general financial condition of a business or other entity. In many ways, the idea of information resembles a standard balance sheet kept in accounting records. It is sometimes considered to be no more than a slightly different version of a balance sheet. The statement is usually divided into two sections, making it relatively easy to compare your current assets with the number of outstanding liabilities.
A statement of condition aims to create a proactive document to quickly determine the net worth of the company or organization. To accomplish this task, the first part of the document will focus on all currently owned assets. This includes various real estate types, including office buildings, manufacturing facilities, or undeveloped land. Other assets, such as securities and cash balances in multiple accounts, are also listed. Essentially, any help that can be relatively easily converted to cash is included in the inventory of earning assets.
All outstanding liabilities are listed in the second part of a condition statement. This may include any mortgage, business loan, equity, or other type of liability that the entity is responsible for paying at some point in the future. Once a complete list of disadvantages is created, it is easy to compare the number of assets to the number of liabilities and determine the organisation’s net worth.
A statement of the condition is sometimes required when a company is seeking a loan or when an acquisition or merger with another company is being discussed. Each line item contained in the statement is supported by documentation found in the accounting records maintained by the organization, which makes it very easy to double-check any figure included in assets or liabilities. In this sense, the statement of condition serves the same purpose as a balance sheet.
Some companies will compile a statement of condition periodically to get a quick snapshot of the company’s current financial situation. By reviewing the breakdown of assets and comparing them to liabilities, business owners can determine if the business appears to be losing ground, maintaining its status, or experiencing a period of growth. If the details in the statement indicate that the company is stagnant or beginning to post a decline in net worth, reviewing the information makes it possible to start brainstorming on how to improve that condition over the next period.
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