The balance sheet is a fundamental financial statement that shows a company’s assets (what it owns), liabilities (what it owes) and shareholders’ equity at a given moment in time. It adheres to the equation: Assets = Liabilities + Shareholders’ Equity. A balance sheet is used by analysts, investors and lenders to compare companies, review net worth, assess risk, secure capital and measure liquidity. The balance sheet is also the basis for calculating a wide array of financial ratios.
A balance sheet reports a snapshot of a company’s financial condition — what it owns, what it owes and how much shareholders have invested. It can be analyzed independently of the more dynamic income statement and the statement of cash flows but is dependent on those two statements for a full picture of a business’s operations.
There are different types of balance sheets, depending on the size and structure of a business. For example, a small business might use a spreadsheet to record its assets and liabilities while a larger publicly-held corporation might have a full accounting system for the preparation of its financial statements. In either case, the information on a balance sheet is presented at a point in time and is subject to a number of areas of professional judgement that can change the figures posted. For instance, accounts receivable are not always collected and inventories may be overstated or understated.
A typical balance sheet will outline a company’s assets in one column on the left and its liabilities on the right. Each will be subdivided into current and long-term categories, with the most liquid elements like cash and short-term investments being listed at the top of each section. A “Total Assets” calculation will then sum up everything. The second section will list all of a company’s liabilities including short-term debts like account payable and payroll as well as the amount it owes on its long-term loans and other debt obligations. Then the company’s shareholders’ equity will be detailed in a similar way with the common stock value, retained earnings and accumulated other comprehensive income being reported. Bilanz Hattingen