Newspaper articles often refer to balance sheets with terms such as ‘the importance of a strong balance sheet’, and ‘not wanting to weaken a strong balance sheet or adversely affecting the debt rating by a stock buyback’.

Required:

1. What is meant by a strong balance sheet? 

2. What is the effect of issuing more shares on the strength of the balance sheet? 

3. What is meant by a share buyback? 

4. What effect does a share buyback have on the accounting equation? 

5. What is meant by a debt rating? Why is it important? 

6. Why is a strong balance sheet important for each of the Australian states (e.g. NSW, Queensland, South Australia, Tasmania, Victoria, Western Australia)?