Use our balance sheet example template, which is available as a free download. Discover how you can access this free balance sheet template. No need to spend money on fancy software.
Business owners must understand how to read and interpret their Balance Sheet. The balance sheet provides a manager or potential investor with a snapshot of an organization for a single point in time.
"As the old saying goes, 'The numbers don't lie', therefore you'd better know what your numbers are telling you."
For instance, if the date listed on the Balance Sheet of the financial statement says 'January 30, 2011', you can be certain that the numbers provided are only accurate on that specific date, not a day after or a day before as numbers will fluctuate continuously.
Many times business analysts overlook the importance of the balance sheet. Instead, they tend to focus more on the Income Statement because they are most interested in actual earnings rather than a simple listing of assets and liabilities.
While earnings are of the utmost importance, one needs to review all of the available financial data in order to complete a proper analysis to determine the overall fitness of the organization.
An easy way to describe the balance sheet is to point out that by subtracting the liabilities from all the assets of a company, the remaining difference is the equity or net worth. The net worth shows, in part, the current strength of the organization, as capital is the foundation of any organization.
A high net worth means a stronger foundation than a low net worth. A high net worth equates to a lower level of risk to the organization.
The reason that this particular financial statement is called a balance sheet is that both sides of the statement MUST balance. In other words, Assets = Liabilities + Equity
The left hand side of our balance sheet example lists the following:
The right hand side of our balance sheet example lists the liabilities and equity in the following order:
Learn more the Balance Sheet and view another balance sheet example or two by checking out these free sample business plans.
Many years ago, the President of Bradstreet’s, the late Charles F. Clark was quoted as saying, “The structure of our society is based on the confidence of the consumer. We could have no civilization were it not for the fact that millions of men and women in the past were deemed worthy of credit by their fellow countrymen.”
"Good intentions alone do not make for a good reputation. You must earn it daily."
“I would like to say,” continues Mr. Clark, “as strongly as possible to every young business person, that one of the chief aims of your daily work should be to strengthen your reputation for quality and honesty.”
Good intentions must be paired with true ability in order to carry out your claims. You must continually prove your ability; turn your promises into successful results and routinely meet or exceed your business obligations.
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» Income Statement Review
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» PART X - The Appendix
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