Knowing how to read a balance sheet is a very important skill for bankers. This is because the balance sheet can reveal a lot of information about how risky a company is.

While the income statement records how much we earn and spend within a period of time, the balance sheet shows us what we own and owe at a given date.

This is a 3-part series on the “Beginners Guide to Investing”. It’s a continuation of the previous post on “How to read an income statement“.

It is important to know how to read not just the income statement, but also the balance sheet and cash flow statement. Looking at all 3 financial statements would give a more complete picture of a company’s financial health.

Before we begin, there is one very important formula to remember in accounting.

What we own is called assets.

What we owe is called liabilities.

Assets minus liabilities = shareholders’ equity.

If