Balance Sheets

A balance sheet is a financial statement that summarizes a company’s asset, liabilities and the total shareholders equity in the company at some specific point in time. These three different segments tell potential investors three things.

In financial accounting and dealing with stocks, one term you must come across is the term Balance sheets. Now, now, no need to be worked up on taking you back to those boring accounting classes in college. As usual, I’ll try to be as simple as I can.

A balance sheet is a financial statement that summarizes a company’s asset, liabilities and the total shareholders equity in the company at some specific point in time. These three different segments tell potential investors three things.

1.    It gives potential investors an idea of the total amount a company owes. The debt the company owes. This is the company’s liabilities.

2.    It gives investors an idea of the total amount the company owns, earnings and profits. Staff and properties. This can be referred to as Assets.

3.    Also, a balance sheet provides information on how much shareholders have invested in the company. This is the shareholder’s equity.

It’s as simple as that. Assets = Liabilities + Shareholders Equity.
Now, a company has to pay for all the things it owns (Assets) by either borrowing money (Liabilities) or taking the money from its investors (Shareholders Equity).