Also known as a statement of financial position, a Balance Sheet is a snapshot of your company’s financial condition at a specific date. There are three sections to the Balance Sheet, Assets, Liabilities, and Owner’s Equity.
In this video…
Hi, I’m Greg for On Track Business Management. In this video, we’ll talk about your statement of financial position.
Not monitoring your balance sheet can prove fatal to a business. The balance sheet will help you get a handle on the financial strength of your company. A balance sheet is also known as a statement of financial position. A balance sheet is a snapshot of a company’s financial condition on a specific date, usually the end of the month, an economic portrait of a business at a specific moment in time, a major party or company financial reports.
A company balance sheet has three parts: assets, liabilities, and ownership equity. Your assets are what your company owns, items that have value. Your liabilities are what your company owes, obligations or debts. Your equity is the owner’s investment in the business, plus retained earnings that have been reinvested in the business. Assets must equal liabilities plus equity.
The balance sheet can help you keep an eye on your business. Use your balance sheet to quickly figure your current ratio, a ratio that shows solvency. Your banker, vendor, or bonding agents are sure to use this ratio. Learn how to calculate a current ratio by watching our ratio video in this series.
Your company balance sheet shows your company’s net worth or book value, and can show you trends. Are receivables taking longer to collect, for instance? Numbers run companies. Use these numbers to help you run your business.
In the next two videos, we’ll learn about your income statement.
Next Video: Income Statement Part 1