Balance sheet

BDC describes a balance sheet as a summary of a company’s assets, liabilities and shareholders’ equity at a specific point in time. Unlike the income statement, which covers a period, it is a snapshot of one date. BDC says lenders use it to assess a loan request, and a buyer can use it to ask what the business owns, what it owes and what stays with the company at closing. The guide on what buyers look for in your financial statements covers the wider picture.

How it is laid out

BDC says a balance sheet classifies assets and liabilities by short-term and long-term. Current assets include cash and accounts receivable, and BDC lists accounts payable and loan payments among current liabilities. It also calls the statement by other names, including statement of financial position.

What to check or ask

• The date the balance sheet is prepared as of, and whether a closing balance sheet will be drawn up (see closing balance sheet)
• Which assets and liabilities are expected to move with the business at closing
• How net working capital is worked out from the current items
• What the equity section shows, and how it compares with the debt the company carries