Balance sheet

A balance sheet provides a snapshot of a company’s financial state at a specific point in time. It helps business owners, investors, creditors, and decision-makers understand a company’s financial health.

The balance sheet shows what the business owns (assets), what it owes (liabilities), and the owner’s or shareholders’ equity (the assets after deducting liabilities, including capital reserve). Assets must equal liabilities and equity.

For example, an airline owns a large fleet of aircraft listed as assets on its balance sheet. In addition, it leases other planes that appear as liabilities. If the airline has $20 billion in total assets and $14 billion in total liabilities, then its shareholders’ equity would be $6 billion.