What Is a Balance Sheet?
A balance sheet is a financial statement that provides a snapshot of a company’s financial position at a specific point in time. It details the company’s assets, liabilities, and shareholders’ equity.
Key Takeaways
- Components: Assets, liabilities, and shareholders’ equity.
- Purpose: To show the financial position of a company.
- Frequency: Typically prepared at the end of each accounting period.
Structure of a Balance Sheet
- Assets: Current and non-current assets, including cash, accounts receivable, and property.
- Liabilities: Current and long-term liabilities, such as accounts payable and long-term debt.
- Equity: Shareholders’ equity, including common stock and retained earnings.
Importance of the Balance Sheet
A balance sheet helps stakeholders assess the financial health of a company, providing insights into its ability to meet short-term and long-term obligations. It is crucial for investors, creditors, and management in making informed financial decisions.
