A balance sheet, also known as a "statement of financial
position," reveals a company's assets, liabilities and owners'
equity (net worth). The balance sheet, together with the income
statement and cash flow statement, make up the cornerstone of
any company's financial statements. If you are a shareholder of
a company, it is important that you understand how the balance
sheet is structured, how to analyse it and how to read it. How
the Balance Sheet Works The balance sheet is divided into two
parts that, based on the following equation, must equal each
other, or balance each other out. The main formula behind
balance sheets is: Assets = Liabilities + Shareholders' Equity
This means that assets, or the means used to operate the
company, are balanced by a company's financial obligations,
along with the equity investment brought into the company and
its retained earnings. Assets are what a company uses to operate
its business, while its liabilities and equity are two sources
that support these assets. Owners' eq