Balance Sheet
The balance sheet is one of the main financial statements of a company. It aims to present the financial situation of the company in a given period, showing its assets, liabilities and equity.
To better understand the balance sheet, it is important to understand some basic concepts:
- Assets: are the resources controlled by the company, which have the potential to generate future economic benefits. Assets can be classified as current assets (which can be converted into cash in the short term) and non-current assets (which have a longer realization period).
- Liabilities: are the company's obligations, that is, the debts it has to pay. Liabilities can be classified as current liabilities (which must be paid in the short term) and non-current liabilities (which have a longer payment period).
- Equity: is the difference between the company's assets and liabilities. Represents the value shareholders have in the company.
On the balance sheet, these elements are presented in the form of an equation:
Assets = Liabilities + Equity
The structure of the balance sheet is divided into two parts: the left side, where the assets are, and the right side, where the liabilities and equity are. Assets are presented in descending order of liquidity, that is, from the most liquid (cash on hand) to the least liquid (real estate, for example).
Liabilities are also presented in descending order of liability, that is, from the most payable (short-term debts) to the least payable (long-term debts). Equity is presented last.
The balance sheet is a fundamental tool for the financial management of the company. It allows assessing the company's financial health, identifying its ability to pay debts, analyzing investment profitability and making strategic decisions.
In addition, the balance sheet is also used by investors, creditors and other stakeholders to assess the strength of the company and its ability to generate profits.
In short, the balance sheet is an essential accounting statement for any business. It provides valuable information about your financial situation and is an indispensable decision-making tool.
