What are the importance of balance of payment to the nation and to the firm?

Question

What are the importance of balance of payment to the nation and to the firm?

Answer 1

In economics, the balance of payments, (or BOP) measures the payments that flow between any individual country and all other countries. It is used to summarize all international economic transactions for that country during a specific time period, usually a year. The BOP is determined by the country's exports and imports of goods, services, and financial capital, as well as financial transfers. It reflects all payments and liabilities to foreigners (debits) and all payments and obligations received from foreigners (credits). Balance of payments is one of the major indicators of a country's status in international trade, with net capital outflow.

The balance, like other accounting statements, is prepared in a single currency, usually the domestic. Foreign assets and flows are valued at the exchange rate of the time of transaction.

Balance of payment accounting record of all transactions made by a country over a certain time period, comparing the amount of foreign currency taken in to the amount of domestic currency paid out. Balance of payment  gives a clear picture of a country.