Why do we need to understand a Balance Sheet?
A Balance Sheet (also known as Statement of Financial Position) is one of the three primary financial statements (along with the income statement and statement of cash flows) showing the company’s financial condition at a specific point in time. Unlike the income statement which shows the performance of a company over a period of time, the Balance Sheet shows the business’s current financial position.
A Balance Sheet enables you to analyze and evaluate the financial health of your business and share this information with others, such as your current or potential investors, lenders, and other persons outside the business who need to stay informed about the business’s financial affairs.
Business managers and anyone thinking of becoming an entrepreneur and starting a business should know how to understand financial statements and the accounting methods used to prepare them. With...