Balance Sheet
A balance sheet is a financial statement that shows a company's assets, liabilities and shareholders' equity at a specific point in time.
The balance sheet is a snapshot of what a company owns and what it owes on a particular date, usually the end of a quarter or year. It follows a basic equation: assets equal liabilities plus shareholders' equity.
Assets include cash, receivables owed by customers, inventory, property, equipment and intangible assets such as patents and goodwill. Liabilities include supplier bills, wages owed, loans and bonds. Shareholders' equity is the difference: the owners' stake, also known as book value.
Both assets and liabilities are split into current items, due or usable within a year, and non-current items. This split allows analysts to calculate ratios such as the current ratio for short-term liquidity and the debt-to-equity ratio for overall leverage.
The balance sheet is one of three core financial statements, alongside the income statement, which shows profit over a period, and the cash flow statement, which shows cash movements. Together they give a fuller picture than any one alone.
Example: a company with $10 billion in assets and $6 billion in liabilities has shareholders' equity of $4 billion.