Balance Sheet: A financial statement that shows a company's assets, liabilities, and equity at a specific point in time.
A balance sheet is a financial statement that provides a snapshot of a company's financial position at a specific point in time. It shows the company's assets, liabilities, and equity, and provides information about the company's financial health, liquidity, and solvency.
The balance sheet is structured so that the company's assets are listed on the left side of the statement, and its liabilities and equity are listed on the right side. The assets represent what the company owns and what it can use to generate revenue, while the liabilities and equity represent what the company owes and how it is financed.
The assets section of the balance sheet includes both current and non-current assets. Current assets are those that are expected to be converted into cash within one year or one operating cycle, whichever is longer. Examples of current assets include cash, accounts receivable, inventory, and short-term investments. Non-current assets are those that are expected to provide benefits to the company over a longer period of time, such as property, plant, and equipment, as well as intangible assets like patents and trademarks.
The liabilities section of the balance sheet includes both current and non-current liabilities. Current liabilities are those that are due within one year or one operating cycle, whichever is longer. Examples of current liabilities include accounts payable, taxes payable, and short-term loans. Non-current liabilities are those that are due beyond one year or one operating cycle, such as long-term loans and bonds.
The equity section of the balance sheet represents the amount of money that the company's shareholders have invested in the company. This includes both the initial capital invested by shareholders as well as any additional capital raised through the sale of shares. Equity also includes retained earnings, which represent the accumulated profits of the company that have not been distributed as dividends.
Overall, the balance sheet is a key financial statement that provides valuable information about a company's financial position, liquidity, and solvency. It is important for investors, creditors, and other stakeholders to analyze the balance sheet in order to make informed decisions about the company's financial health and future prospects.