Closing balance sheet
A closing balance sheet is a balance sheet prepared as at the closing date of a business sale, showing the business’s assets, liabilities and shareholders’ equity at that moment. Check whether the purchase agreement uses it to measure working capital against an agreed target.
BDC describes a balance sheet as a summary of a company’s assets, liabilities and shareholders’ equity at a specific point in time. A closing balance sheet simply fixes that point at the closing date. It matters where a price depends on net working capital at closing, as in a working capital true-up.
What to check or ask
- Who prepares it, and how long the other side has to review it
- Which accounting policies the agreement names, and whether they match the past statements
- Which items count toward working capital and which are excluded
- How a disagreement is settled, and what the agreement says about timing
Why the date matters
BDC calls a balance sheet a snapshot of what the company is like at that moment, so the same business can show different figures on different days. Check that the agreement fixes the exact cut-off time. See how a post-closing working capital adjustment works for the wider process.
Sources
This definition is checked against primary sources. Links were last confirmed on the dates shown.
- 01Business Development Bank of CanadaGovernmentWhat is a balance sheet?
- 02Business Development Bank of CanadaGovernmentWhat are financial statements?
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