What it is
A balance sheet is a financial statement that shows what a company owns (assets), its financial obligations (liabilities), and shareholders’ stake in the business (equity) during a specific time.
These 3 components must balance out, meaning the value of assets must equal the combined value of liabilities and equities. Put together, these figures offer a look into the financial status of a company.
What it means for you
For investors, a balance sheet can serve as a snapshot of a company’s financial health. By looking at this statement as well as other financial reports, you can make informed decisions about buying, holding, or selling assets like stocks.
Keep in mind that a balance sheet only includes information within a certain period, and is often compared to results from a similar period during the previous year.
You may want to look at multiple balance sheets over the years if you want to know how a company’s situation has evolved, whether it has grown or not.
There may be differing ways to interpret the figures on financial statements. It’s best to consult experts if you need help determining what certain numbers represent.
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