Why are financial statements so important in bonding?
Financial statements are the main source of information about a contractor’s financial position and performance. It provides information necessary to make economic decisions about the contractor.
Financial statements are used by bankers, sureties, vendors, investors and many others to make assessments about the contractor’s future risks and potential and to establish benchmark trends and relationships.
Users rely on the following data within a financial statement to make their decisions:
- Working capital – current assets less current liabilities
- Net worth – owners’ investment in the contractor
- Debt to wroth – measure of the contractor’s financial leverage
- Contract/revenue backlog – amount and quality of the contractor’s uncompleted work
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