What would happen if businesses had a poor closing bank balance?
The bank balance is just one asset (or liability) of a company. A full balance sheet considers all the assets and liability. Provided the total net assets is positive then the business is technically solvent. Obviously if most of the assets are fixed, such as buildings, and most of the liabilities are current, such as trading debts, it may be difficult for the business to actually pay them off. The cash flow of the business is more important than the bank balance at any particular time. Most businesses have significant current assets such as stock and debtors. Provided they are regularly selling stock and collecting money owed they have the ability to pay debts when required even if the bank balance is low.
