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Let us discuss this issue, In fact both of them are reasonable measurement and can be used . Especially the balance Sheet. However, One more issue could give more relevant help on this issue. Which is the "TREND ANALYSIS" using this type advanced method of financial analysis will give you more accurate estimation on the future of the company . Thank You
The Financial Health of a firm is determined by its Liquidity, Leverage and Profitability. All these factors have the internal control by the management of the company. These are assessed with the help of Analysis of Both Balance Sheet and Income Statement. It involves verification of historical information that is very much reflected in the Balance Sheet in its Assets and Liabilities, and also with the profit and loss account as to which direction the company moves.
A Strong Balance Sheet itself is in an indication that the future is bright and one can reconfirm the efficiency of the business by the verification of the Income Statement.
Both are Important,
Balance sheet shows the growth, The assets utilized to generate revenue and the excellent, good or bad growth of the company, the increase or decrease in Receivables/ Payable totally depends on Strong Balance Sheet.
The Profit and Loss shows the trends in sales or revenue in unit wise, segment wise and product wise also useful for the future trend.
