finance
Balance Sheet
Snapshot of what the business owns (assets), owes (liabilities), and what's left for owners (equity).
Definition
The balance sheet is a point-in-time snapshot following the equation Assets = Liabilities + Equity. Assets are everything the business owns (cash, receivables, equipment, inventory). Liabilities are everything it owes (payables, loans, deferred revenue). Equity is the residual - what would be left for owners if everything were liquidated and debts paid. The balance sheet shows financial health (liquidity, leverage) where the P&L shows performance.
In your business
- →Check current ratio (current assets / current liabilities) - above 1.5 is healthy
- →Watch debt-to-equity ratio - high leverage limits flexibility
- →Reconcile monthly with your accounting system - errors creep in fast