Balance Sheet
A snapshot of a company's assets, liabilities, and equity at a specific point in time.
A balance sheet reports what a company owns (assets), what it owes (liabilities), and the residual value belonging to shareholders (equity) at a specific date. The fundamental equation is: Assets = Liabilities + Equity.
Unlike the P&L, which covers a period, the balance sheet is a point-in-time snapshot. It tells you about a company's financial position — its liquidity, leverage, and net worth — rather than its performance.
Key sections include current assets (cash, receivables, inventory), non-current assets (property, equipment, intangibles), current liabilities (payables, short-term debt), long-term liabilities (loans, bonds), and shareholders' equity (share capital, retained earnings).
The balance sheet is essential for calculating financial ratios like the current ratio, debt-to-equity ratio, and return on equity — all critical metrics for investors and lenders evaluating a company's financial health.
Related Terms
A financial report summarising revenue, costs, and profit over a specific period.
Current assets minus current liabilities — a measure of short-term liquidity and operational efficiency.
Current assets divided by current liabilities — a quick test of short-term debt coverage.
Total debt divided by total equity — a measure of financial leverage and risk.
Further Reading
Not sure what financial reports your Malaysian business needs? This simple guide explains P&L, balance sheets, and cash flow statements in plain language.
A founder and CFO guide to financial due diligence — what sophisticated investors examine, common red flags, and how to prepare your business.