Provides a quantitative summary of a company’s assets, liabilities, and net worth at a specific point in time.
Balance Sheet
The quantitative summary of a company’s assets, liabilities, and net worth at a specific point in time is called a balance sheet. A balance sheet is a financial statement that displays a company’s financial position by listing its assets, liabilities, and equity.
Assets are resources controlled by a company that are expected to provide future economic benefits and can be measured in monetary terms. Examples of assets include cash, accounts receivable, inventory, property, and equipment.
Liabilities are obligations that a company owes to other entities and can also be measured in monetary terms. Examples of liabilities include accounts payable, notes payable, and loans.
Net worth, also known as equity, is the difference between a company’s assets and liabilities. It represents the residual interest in the assets of the company after deducting liabilities.
The balance sheet is important because it reflects a company’s financial position and can be used to assess its capacity to pay its debts, meet its obligations, and pursue growth opportunities. It is also used in financial analysis to evaluate a company’s profitability, liquidity, solvency, and leverage.
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