The balance sheet records the companies assets, liabilities and equity. Assets is what the company owns and liabilities are what it owes. Equity represents the value of money that shareholders have invested in the company and it is calculated by taking Assets minus Liabilities.
The balance sheet is important in our analysis of a company as it reflects the financial position of a company. The levels of debt and the amount of cash the company has can be seen in the balance sheet. Let’s go through the various entries in the balance sheet one by one.
The first portion of the balance sheet list the current assets. These assets are likely to be used up …