The balance sheet of a company, also known as a 'statement of financial position', is a financial document that showcases the company's assets, liabilities, and shareholders' equity at a specific point in time.
Delving deeper into the concept, a balance sheet paints a comprehensive picture of a company's financial health. It is divided into three main categories: assets, liabilities, and shareholders' equity.
Assets are the resources owned by a company, including tangible items like property and equipment, and intangible items like patents and trademarks. Liabilities represent the company's debts and obligations, including loans, accounts payable, and accrued expenses. Shareholders' Equity, also known as net assets, is the residual interest in the assets of the entity after deducting liabilities. It represents the capital the company has that can be claimed by the owners, i.e., the shareholders.
The balance sheet is fundamental to financial analysis as it provides investors, creditors, and others a snapshot of the company's current financial condition.
Ford's balance sheet includes assets such as cash, inventory (cars), and property (factories and equipment). Its liabilities would include accounts payable, accrued expenses, and long-term debt. The shareholders' equity section would show the capital contributed by shareholders and retained earnings.
Apple's balance sheet lists assets like cash, accounts receivable, and inventory (iPhones, iPads). Liabilities include accounts payable, accrued expenses, and long-term debt. The shareholders' equity section represents the money invested by shareholders and the earnings retained by Apple.
On Amazon's balance sheet, assets include cash, inventory (goods for sale), and property (warehouses and offices). Its liabilities encompass accounts payable, accrued expenses, and long-term debt. The shareholders' equity section shows the capital invested by shareholders and the earnings Amazon has retained.