Understanding a company’s balance sheet can help you separate good stocks from the bad. Learn how to read a balance sheet and become a better investor.
While a company’s income statement presents the current results of a company’s operation, there are other financial statements that can present how a company is performing using other factors. The balance sheet, for example, depicts the financial strength (or weakness) of a company.
So what’s in a balance sheet?
A company’s balance sheet has three main sections:
- Assets: Items of economic value that are owned by a company.
- Liabilities: A company’s financial obligations.
- Equity: Sometimes referred to as shareholders’ equity, this represents the net accounting value of the company.