Introduction to Financial Statements – Balance Sheet

Introduction to Financial Statements – Balance Sheet

Some Financial Statements identify information “over a period of time” for example, 1 quarter or 1 year.

A Balance Sheet, however, describes a company’s financial position at a “point in time.” This enables any individual to identify exactly how a business is operating on any given day. The Balance Sheet should clearly identify ASSETS = LIABILITIES + EQUITY. This is where each category is expanded and explained.

The Balance Sheet is important because it enables investors and business owners to see how a company is performing at any given moment and to explain the company’s current financial position. A business owner needs to be able to identify what the business owns (assets), what the business owes (liabilities), and the owner’s stake in the business (equity).

Too many people want to start a business or invest in companies before they understand the fundamentals and the language of business. Everyone needs to take the time to thoroughly understand these concepts before starting a business and before investing in a stock.

Do you keep an updated Balance Sheet for your business?

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