Which document is essential for determining long-term financial viability?

The balance sheet is essential for determining long-term financial viability because it provides a snapshot of an entity's financial position at a specific point in time. This document details the assets, liabilities, and equity of a business. By analyzing the balance sheet, stakeholders can assess the overall financial health and stability of the organization.

Key aspects of the balance sheet include the total assets, which represent what the company owns, and total liabilities, representing what the company owes. The difference between these two, known as equity, indicates the net worth of the business. A strong balance sheet typically shows a healthy amount of assets relative to liabilities, suggesting that the company is capable of covering its debts and has a solid foundation for long-term growth.

In contrast, while the annual report offers a broader view of the company's performance over the year, including management discussions and notes, it does not provide the immediate snapshot of financial position like the balance sheet does. The cash flow statement focuses on the inflow and outflow of cash over a certain period, which is crucial for understanding operational liquidity but does not directly assess long-term sustainability. Lastly, the departmental income statement provides detailed income information on specific business areas but misses the comprehensive view of assets and liabilities necessary for evaluating overall financial viability.