Balance Sheet Fundamentals

A balance sheet is a financial statement that shows a company's financial position. It details assets, liabilities, and shareholders' equity at a specific point in time.

Assets are divided into current and non-current. Current assets include cash and items that can be converted into cash within a year, while non-current assets are long-term investments.

Liabilities mirror assets, categorized as current or long-term. Current liabilities are debts due within a year, and long-term liabilities are obligations payable beyond one year.

Shareholders' equity represents the residual value to shareholders after liabilities have been paid off. It includes retained earnings and contributed capital.

Liquidity ratios, like the current ratio and quick ratio, assess a company's ability to cover short-term obligations, offering insights into financial health.

The debt to equity ratio compares a company's total liabilities to its shareholder equity, revealing how a company finances its operations and growth.

Asset turnover ratios help gauge how effectively a company uses its assets to generate revenue, indicating operational efficiency and profitability potential.