The balance sheet is a financial statement that shows what a company owns and owes at a given time. 📸

Just like the income statement, it has 3 key numbers: assets, liabilities and equity.

1️⃣ Assets = anything a company owns that has value, like cash, inventory, buildings and private jets 💰

2️⃣ Liabilities = money that a company owes to other people or companies 💸

3️⃣ Equity = assets - liabilities.

Think of equity like a company’s net worth – it’s what would be left of it if it paid off all its debts 🌟

If a company has more liabilities than assets, it has negative equity. 📊

This can often be a red flag, because if the company tried to sell all its assets to pay its debts, it's still not enough to pay it off!

Meanwhile, a company with more assets than liabilities is often considered to have a “strong” balance sheet! 💪

Because even if they needed to pay all their debts immediately, they could sell their assets and still have some stuff left over.

So, now you know that while an income statement shows how profitable a company is over time, a balance sheet shows its financial strength over time.