Balance Sheet

The balance sheet (also called the statement of financial position or statement of financial condition) presents a company’s current financial position by disclosing the resources the company controls (assets) and its obligations to lenders and other creditors (liabilities) at a specific point in time.

Owners’ equity represents the excess of assets over liabilities. This amount is attributable to the company’s owners or shareholders.

Owners’ equity is the owners’ residual interest in (i.e., residual claim on) the company’s assets after deducting its liabilities.

Accounting equation (the balance sheet equation)

Assets = Liabilities + Owners’ equity

Using the balance sheet and applying financial statement analysis, the analyst can answer such questions as

Has the company’s liquidity improved?

Is the company solvent?

What is the company’s financial position relative to the industry?