Reading Financials5 min read
Reading a balance sheet without the jargon
Assets, liabilities and equity. Three words that describe everything a company owns and owes.
A balance sheet is a snapshot of a company's finances at one moment. It has three parts, and they always balance.
The three parts
Assets are what the company owns: cash, factories, inventory. Liabilities are what it owes: loans, dues to suppliers. Equity is what is left for shareholders after subtracting liabilities from assets.
The one rule
Assets always equal liabilities plus equity. That is why it is called a balance sheet: the two sides must match.