How to Read a Balance Sheet (Beginner's Guide)
What is a balance sheet?
A balance sheet lists assets, liabilities, and equity at a single point in time. Always: Assets = Liabilities + Equity.
What goes in assets?
Current: cash, receivables, inventory. Non-current: property, plant & equipment, goodwill, intangibles.
What goes in liabilities?
Current: accounts payable, short-term debt. Non-current: long-term debt, deferred revenue, lease obligations.
What does equity represent?
The residual: assets minus liabilities. What would be left for shareholders if the company sold everything and paid off debts.
Frequently asked questions
Balance sheet vs income statement?
Income statement covers a period. Balance sheet is a single-day snapshot.
What's a healthy current ratio?
Above 1.0. Current assets รท current liabilities. Above 2.0 is conservative.
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