What is a Balance Sheet?

The balance sheet, also called the Statement of Financial Position or Statement of Financial Condition, provides a snapshot of the firm’s financial position at a specific moment in time. The balance sheet lists the firm’s assets (or resources) and claims against those assets. The two basic types of claims are liabilities (to creditors) and equity (of owners).

Credit analysts are concerned about the company’s ability to repay its debt. The balance sheet provides information regarding the amount of debt, when it is due, and the assets available to repay it. Equity investors are concerned with the company’s ability to generate future cash flows and make distributions to owners. The balance sheet provides essential information regarding the company’s health and ability to generate cash flows. However, the balance sheet is just one piece of the puzzle. The other financial statements (income statement, statement of cash flows, and statement of owners’ equity) are all integral to evaluating whether a company is worthy of investment.

For more information, see all articles on: Accounting, Financial Statement Analysis, Fundamental Analysis

See also:
  • How Lessors Report Operating Leases
  • Depreciation
  • Common Size Balance Sheets
  • Balance Sheet Recognition of Pension Liabilities Under U.S. GAAP
  • Translating Foreign Subsidiary Balance Sheet – Illustrating the All-Current Method
  • Technical Analysis Explained : The Successful Investor's Guide to Spotting Investment Trends and Turning Points

    The Intelligent Investor: The Classic Text on Value Investing

    Financial Statement Analysis: A Practitioner's Guide, 3rd Edition

    Managing Investment Portfolios: A Dynamic Process (CFA Institute Investment Series)

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