Q:

What does a balance sheet tell you?

A:

Quick Answer

A balance sheet gives a complete picture of a company's financials as of a certain date. Items on the balance sheet are put into real numbers so that company management and investors can see exactly how much money, or cash flow, the company has.

Continue Reading

Full Answer

A company's balance sheet details exactly how much money a company has, where it's located and how much money is outgoing. Balance sheets can be created for any point in the company's financial history as long as it is in the past. A balance sheet cannot be made for the future. Future financials are considered forecasting or projections. Balance sheets capture the finances of a company at a certain point in time. Items that are detailed on the balance sheet include the company's assets, liabilities and what equity each stakeholder or owner has.

A company's assets include inventory, accounts receivable, property, value of machinery — basically anything that contributes to the company's overall value. Liabilities are the amounts that the company owes other people, such as accounts payable, loans and taxes that are due. Anything for the company that was purchased on credit and is not paid off entirely is considered a liability. Having a balance sheet helps management and owners to determine the amount of the company's capital.

Learn more about Accounting

Related Questions

Explore