Why is it important to know the Balance Sheet? It's not just about account numbers

You need to understand What is a Balance Sheet not because it’s an accounting subject, but because it is a tool that tells you “How much money does this company have? How much debt does it owe? And what is the remaining equity?” Once you have this information, you can decide whether to “invest in this company” or “is my business healthy?”

Whether you are an executive, investor, or business owner, the ability to read a Balance Sheet is a skill you must have.

What is a Balance Sheet (Financial Position Statement) in simple language?

A Balance Sheet is a snapshot of a company’s financial health at a specific point in time. It shows:

• What “resources” the company has (Assets)
• Who and how much the company “owes” (Liabilities)
• How much the owner actually gets to keep (Owner’s Equity)

Compared to an ordinary person:

• Assets = house, car, money in the bank, valuable items
• Liabilities = loans that still need to be paid
• Owner’s Equity = what’s left after deducting liabilities, which is what we truly own

Basic formula to remember: the accounting equation