It organizes and summarizes a firm's assets, liabilities, and equity. Therefore, there was a decrease in what the company owns over the last five years. The increase in liabilities is not desirable because liabilities indicate how much the firm owes. The value of assets equals the sum of liabilities plus stockholders' equity. Total equity is the difference between the total value of assets and the total value of liabilities.
Liquidity is the rate at which an asset can be converted to cash.
This is important because the more liquid a business is, the less likely it is to experience financial distress. Liquidity is also shown by dividing the current assets by the current liabilities, which gives the current ratio. 3M's current ratio is 1.38, which is greater than one. This indicates that the net working capital is positive and that the company's assets are highly liquid. The income statement measures performance over a period of time, usually a quarter or a year.