The Balance Sheet

From The Hoss's Mouth

A company's balance sheet is a document which contains valuable information for any potential investor. It provides a financial snapshot of what a company owns (assets) and what it owes (liabilities) on a given date. Each and every transaction has an equal debit and credit entry, therefore the total value of the assets always equals the total value of the liabilities, hence the name "Balance Sheet".

This financial document is divided into two sections: one contains the assets, the other the liabilities.


The Asset side of the balance sheet shows the fixed and current assets. Fixed assets are both tangible and intangible.

Fixed Tangible Assets: include physical property, such as buildings, land, trucks, equipment, and computers, inventory, etc.

Fixed Intangible Assets: things that you can't touch but do have value such as goodwill, trademarks, patents, and long term investments

Current Assets are short term assets which can fluctuate in value very frequently, often every day. They include but are not limited to cash, short-term investments, stock, and consumer debt.

The Liabilities side of the balance sheet contains a company's current and long-term liabilities.
Current Liabilities are a company's short-term obligations such as current year's taxes, short term loans, money owed to suppliers, rent, payroll and bank overdrafts (if any).

Long-Term Liabilities are liabilities that are generally due after one year, such as long-term loans of financing.

The Hoss reminds you that the examples above do not include all the assets and liabilities a company may or may not have.

The balance sheet shows the potential investor how a company is financed, how much capital it is using, the company's liquidity and how solvent it is. The investor can compare several balance sheets to determine the company's ongoing performance.

The next addition of Hoss Cents Free Financial Money Magazine will provide information on the second financial document we are going to look at, The Income Statement.

Stay on track,

The Hoss

Next Hoss Cents Free Financial Money Magazine Post: The Income Statement
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